FAQs for Lido's Wrapped-DOT liquid staking token
wstDOT is the wrapped version of stDOT. Due to the nature of Lido, the amount of stDOT on your balance is not constant - it changes daily as staking rewards come in. This is what's known as a rebasable token. In the case of stDOT, this is reflected through a daily token balance change to reflect your earned rewards.
This rebase works across integrated DeFi platforms like Curve. This means that if you are to stake your stDOT across these protocols to earn additional yields, you will continue to benefit from daily stDOT staking rewards as well. StellaSwap is not designed for rebasable tokens and as a result, you risk losing out on a portion of your daily staking rewards through providing stDOT as liquidity across these platforms.
As some DeFi protocols - e.g. StellaSwap - require a constant balance mechanism for tokens, Lido let's you "wrap" your stDOT into wstDOT to keeps your balance of stDOT fixed. Instead of updating daily, wstDOT uses an underlying share system to reflect your earned staking rewards.
- You wrap 100 stDOT to 99.87 wstDOT.
- You continue to earn rewards on your wstDOT.
- When you unwrap your wstETH, you receive 101 stDOT.
wstDOT allows for seamless integrations across the DeFi space, facilitating the growth of stDOT as a key piece of many unique Ethereum protocols.
Lido for Polkadot is a liquid staking solution for DOT backed by industry-leading staking providers.
Lido lets users earn DOT staking rewards without needing to maintain infrastructure and enables them to trade staked positions, as well as participate in on-chain decentralized finance with their staked assets.
Lido for Polkadot gives you:
- Liquidity through tokenization — no activation delays and the ability to sell your staked tokens or use them as collateral in decentralized finance;
- One-click staking — no complicated steps;
- Decentralized security — assets spread across the industry’s leading validators chosen by the Lido DAO.
A xcDOT token holder connects their wallet and deposits their tokens into the Lido program. They immediately receive stDOT tokens that represent a share of the total pool, and the Lido program delegates DOT to Lido-controlled validators on the Polkadot network. When these delegations accrue rewards on the allotted stake, the total DOT under management grows and this increases the value of stDOT tokens.
Liquid staking protocols allow users to earn staking rewards without locking assets or maintaining staking infrastructure. Users can deposit tokens and receive tradable liquid tokens in return. Liquid staking combines the benefits of staking (earning rewards) and brings liquidity, as well as additional possibilities to increase your assets or hedge your positions by participating in DeFi.
Furthermore, the Lido program stakes these tokens with DAO-elected staking providers. As users' funds are controlled by the program, staking providers never have direct access to the users' assets. Additionally, by involving different staking providers, Lido diversifies risks across multiple validators.
stDOT is a liquid token that represents your share of the total DOT.xc pool deposited with Lido. As soon as you delegate to the pool, you receive the newly minted stDOT. Over time, as your DOT delegation accrues rewards, the amount of your stDOT increases. Interestingly, there is no waiting time for receiving stDOT tokens. When a user delegates their DOT tokens, they do not need to perform or wait for the completion of any delegation or activation steps, as is the norm in traditional staking. The user can instantly exchange stDOT for DOT.xc at any time in the open market.
wstDOT is simply a wrapper to allow for the usage of stDOT across DeFi protocols on Moonbeam. You can get wstDOT by wrapping stDOT on StellaSwap: https://app.stellaswap.com/exchange/swap
The amount of stDOT that you will receive is calculated based on the ownership share. The reason you get slightly less stDOT than DOT.xc is due to rounding when dividing:
shares_amount = amount_of_DOT.xc * getTotalShares()
stDOT_amount = shares_amount * getTotalPooledKSM()
amount_of_DOT.xcis a given DOT.xc you want to exchange
getTotalShares()is a call to Lido contract
getTotalPooledKSMis a call to Lido contract. This method works with KSM as well as with DOT.
In traditional Polkadot staking a user has to perform several steps manually:
- Create a Stash Account and bond DOT to it;
- Nominate validators;
- Monitor validator's yield to maximize profit.
Staking on Polkadot requires expert knowledge, the main being the fact that slashing can get very severe if the staking is managed improperly.
Staking DOT through Lido will come with a variety of benefits:
- One-step process — just deposit into the pool with a single click.
- The pool takes care of validator diversification.
- Immediate appreciation — you start earning from the pool from the moment of deposit.
Withdrawals of DOT.xc from the Lido program can be done through the Unstake tab. However, unstaking directly from the Lido program will incur the Polkadot stake unbonding period, which is roughly 30 days. Immediate withdrawal options will be available in the open market through liquidity pools on AMM protocols and other DEXes where one will be able to immediately exchange stDOT for DOT.xc. If you wish to instantly receive DOT.xc, we recommend trading stDOT directly on an exchange.
DOT.xc can be instantly exchanged for DOT through the Transfer tab.
- Downtime risk: Polkadot validators can go offline, in which case they do not earn staking rewards. To minimize this risk, Lido stakes across multiple professional and reputable node operators with heterogeneous setups. This will also serve to mitigate potential slashing risks.
- stDOT Price Risk: As mentioned above, withdrawals from the Lido program take some time to deactivate. Liquidity pools in the open market will be available for instantly redeeming stDOT for DOT. On such pools, users risk an exchange price of stDOT, which is lower than the inherent value due to withdrawal restrictions on Lido, making arbitrage and risk-free market-making impossible. The Lido DAO is driven to mitigate the above risks and eliminate them to the extent possible. Despite this, they may still exist, and hence it is our duty to communicate them.
Lido applies a 10% fee on a user's staking rewards. This fee is split between node operators, the DAO treasury, and Lido for Polkadot developers. This fee cut is applied to incentivize Lido maintainers.
In the Polkadot network unbonding period usually takes 30 days.
When unbonding period is over, you can claim your DOT.xc tokens, that your request for redeem, simply by clicking on the "Claim" button on the "Unstake" page.