Lido Finance is the largest liquid staking protocol on Ethereum, controlling roughly 30% of all staked ETH. It issues stETH — the most widely integrated liquid staking token in DeFi, used as collateral on Aave, in Pendle yield markets, and across hundreds of protocols.
How Lido Works
When you deposit ETH into Lido, you receive stETH (staked ETH) in return. Lido delegates your ETH to a curated set of professional node operators who run Ethereum validators on your behalf.
stETH is a rebasing token — its balance in your wallet increases daily as staking rewards are distributed. If you deposit 10 ETH and the APY is 4%, you'll have ~10.4 stETH after one year.
wstETH (wrapped stETH): A non-rebasing version of stETH. Instead of your balance growing, the exchange rate of wstETH to ETH increases. Most DeFi protocols prefer wstETH because rebasing tokens complicate accounting. When integrating stETH with Aave, Pendle, or Curve, you typically wrap to wstETH first.
Current Yield
Lido's stETH APY tracks Ethereum's consensus layer rewards plus MEV tips and priority fees. In 2026, this is approximately 3–5% APY depending on network activity.
Lido takes a 10% cut of staking rewards (split between node operators and the Lido DAO treasury). So if raw Ethereum staking APY is 5%, stETH APY is ~4.5%.
stETH in DeFi
stETH's dominance means it's the best-integrated LST across Ethereum DeFi:
Aave: Supply stETH or wstETH as collateral. Borrow USDC or ETH against it. Combined staking yield + borrowing creates leveraged staking strategies.
Curve: The stETH/ETH Curve pool is one of the deepest on Ethereum, used for large conversions with minimal slippage.
Pendle: wstETH is tradeable on Pendle — split into fixed-rate PT and yield-bearing YT for yield trading strategies.
Morpho: wstETH is the most used collateral on Morpho Blue, Ethereum's largest modular lending protocol.
EigenLayer: wstETH can be restaked into EigenLayer to earn additional AVS yield on top of staking rewards.
The Centralization Concern
Lido's ~30% share of staked ETH is a real decentralization concern for Ethereum. If Lido's operator set acted maliciously or was compromised, it could destabilize Ethereum consensus.
The Ethereum community has debated self-imposed caps on Lido's stake share. Lido has implemented dual governance — stETH holders can veto DAO decisions — to partially address this. But the concentration concern remains valid.
LDO Token
LDO is Lido's governance token. Holders vote on node operator additions, fee structures, protocol upgrades, and treasury spending. LDO has no direct revenue sharing — Lido's fee revenue goes to the DAO treasury, not LDO holders directly.
Lido vs Rocket Pool vs Frax vs Coinbase
| Protocol | Token | Decentralization | APY | |----------|-------|-----------------|-----| | Lido | stETH | Medium (curated ops) | ~4.5% | | Rocket Pool | rETH | High (permissionless) | ~3.8% | | Frax | sfrxETH | Medium | ~5.2% | | Coinbase | cbETH | Low (centralized) | ~3.2% |
Rocket Pool is more decentralized. Frax offers higher APY via its dual-token model. Lido wins on DeFi integration depth.