How Does Lido Work? Staking ETH Through a Pool, Explained

Lido works like a shared taxi. On your own, staking ETH means buying a whole car - 32 ETH and a machine that never goes offline. Lido lets you put in whatever you have, pools it with everyone else's, pays professional drivers to do the driving, and hands you a token called stETH that represents your seat. The ETH earns staking rewards the whole time, and stETH is yours to hold, trade or use elsewhere.

What happens to the ETH you deposit?

It goes into a queue inside the protocol and is handed out in 32 ETH chunks to node operators - staking firms that the Lido DAO has voted in. Each operator submits its validator keys in advance, keeps the machines online, and exits validators when the protocol asks. No single operator is meant to control much of the pool; Lido's own risk page says each entity runs under 1% of the validators, and they are deliberately spread across different client software so one bug cannot knock them all out together.

Who decides what your stETH is worth?

An oracle committee of nine independent reporters. Validators live on a separate layer of Ethereum that the stETH contract cannot see, so once a day the committee reports what the validators are holding, and at least five of the nine must agree before the report counts. That report is what makes your stETH balance tick upward overnight. There are hard limits built in: a report claiming more than 27% a year, or a drop of more than 5% in total staked ETH, is rejected rather than applied.

What does it cost, and how do you get out?

Lido keeps 10% of the staking rewards, split between the node operators and the DAO's treasury. The rest lands in your balance, which currently works out to a little over 2% a year. To leave, you burn stETH and join a withdrawal queue; Lido gives you an NFT that marks your place, and when the oracle finalises the request you claim your ETH, normally one to five days later. The queue is Ethereum's, not Lido's - in September 2025 a large operator exited its entire validator set and the network-wide wait stretched past 46 days.

If you are trying this for the first time, stake a small amount and watch one daily rebase land before you do anything clever with the token. Next: what stETH actually is, and liquid staking in general.