The functionality of the lodestone is that you hit it with a compass to have your compass point in the direction you want. However, I believe its functionality is only supposed to work in the Nether, not the overworld or end.
Comments 3
Seeing that's it's crafted with netherite and the whole update theme is centered around the Nether, I think the devs intended the lodestone compass feature be used only in that dimension (although i'm more than fine with it if it's supposed to be used in all dimensions).
WAI (at least for overworld):
— Does the block work in the overworld too?
— It does! - Maria Lemón
Why should it only work in the Nether? Doesn't make sense to me. Anyway, confirmed.