What are the risks of staking with Lido? (2024)

FAQs

Is Lido good for staking? ›

Lido has become one of the go-to choices for stakers and investors due to its industry-leading features. Some of them include: Easy staking. By staking their assets, Lido users can earn daily staking rewards.

Unlike other staking providers, Lido DAO's staking rewards are designed to maintain asset liquidity. For example, when users stake ether (ETH), they receive staked ETH (stETH) tokens. Similarly, those who stake native LUNA tokens on Terra receive bLUNA and those who stake SOL on Solana receive stSOL.

No, it's not currently possible to unstake ETH that has been staked in the staking contract. However, you currently have the option to swap your stETH balance back for regular ETH. This achieve the same results as "unstaking" your ETH. You can swap stETH for regular ETH using the ParaSwap app in Ledger Live.

As we've seen with stETH, liquid staking doesn't come without risks. Although generally stable, there's always some risk of de-pegging and the token losing value. This comes as a result of many liquid staking tokens functioning through elastic supply/rebasing.

One of the biggest disadvantages of staking crypto is that it can tie up your assets for a long period of time. For example, if you stake your coins for a year, you will not be able to access them during that time.

When staking with Lido, users receive stETH tokens which are issued 1:1 to their initial stake. stETH balances can be used like regular ETH to earn and lending rewards, and are updated on a daily basis to reflect your ETH staking rewards.

Our pick for the best Ethereum staking pool is Lido.

Staking could be for you if you want to validate the network, increase its health and security, and gain a reasonable payout in the process. Comparatively low risk: Compared to other cryptocurrencies, Ether is a stable staking option. Its popularity, global use, and security give it an advantage over most other tokens.

When a crypto investor stakes their holdings (in other words, leaves them in their crypto wallet), the network can use those holdings to forge new blocks on the blockchain. The more crypto you're staking, the better the odds are that your holdings will be selected.

How does staking work? If a cryptocurrency you own allows staking — current options include Ethereum, Tezos, Cosmos, Solana, and Cardano — you can “stake” some of your holdings and earn a percentage-rate reward over time. The reason your crypto earns rewards while staked is because the blockchain puts it to work.

Are staking rewards guaranteed? ›

However, staking is not without risk. You'll earn rewards in crypto, a volatile asset. Sometimes, you have to lock up your crypto for a set period of time. And there is a chance that you could lose some of the cryptocurrency you've staked as a penalty if the system doesn't work as expected.

With Lido, you receive staking rewards within 24 hours of your deposit being made, without waiting for validator activation, which helps offset the initially lower rate.

Lido provides liquid staking, which allows more flexibility for stakers as they can withdraw their funds at any time as opposed to staking Ethereum directly and having it locked up.

If you are staking Ethereum with Lido you can stake your stETH on curve.fi/stETH for rewards which you can claim and compound in real time to benefit from the compounding effect.

While Forbes Advisors ranked Gemini, KuCoin, Kraken, Coinbase and Binance.US as the Best Crypto Exchanges for Staking and Rewards, other crypto exchanges offer staking and rewards for crypto holdings.

There are a few risks of staking crypto to understand: Crypto prices are volatile and can drop quickly. If your staked assets suffer a large price drop, that could outweigh any interest you earn on them. Staking can require that you lock up your coins for a minimum amount of time.

Since staking requires locking up user funds with no opportunity to switch pools, stakers don't have to pay transaction costs. Instead, they earn a percentage of network fees when they validate transactions. When compared to liquidity pools, staking has much lower maintenance costs for generating returns.

Therefore, even when funds are “locked” during the staking period, this doesn't mean that they're entirely safe. While the risk of crypto hacking is ubiquitous across the industry, staking is subject to unique, and arguably more damaging, risks: slashing and penalties.

Last month, Nandan Nilekani-backed ShopX also announced that it was shutting down operations. Ronnie Screwvala-backed edtech startup Lido Learning has filed for insolvency and bankruptcy with the Mumbai bench of National Company Law Tribunal due to a cash crunch, Entrackr reported.

The main reason why stETH doesn't trade at the same price as ETH is that withdrawals are not enabled in the beacon chain. This means that if stETH is currently trading below 1 ETH there is no risk-free arbitrage, no one can buy one stETH and redeem today for 1 ETH.

Does Coinbase use Lido? ›

Yes, Lido DAO Token is currently available on Coinbase's centralized exchange.

Protocol fee

Lido applies a 10% fee on staking rewards that are split between node operators and the DAO Treasury.

When staking with Lido, users receive stETH tokens which are issued 1:1 to their initial stake. stETH balances can be used like regular ETH to earn and lending rewards, and are updated on a daily basis to reflect your ETH staking rewards.

Pool Staking Is a Great Option for Smaller Crypto Owners

You don't need to put a lot of effort into the process, and doing your research can ensure that you join a profitable pool that could earn you big bucks over time.