ERMBVMzvefbEEHQBiF

KYCO: Know Your Company

Reveal Profile

5 December 2025

1) Overview of the Company

Lido Finance is a decentralized liquid staking protocol founded in 2020 and headquartered in Finland, operating as a non-custodial staking solution for cryptocurrencies with a focus on Ethereum. The company provides liquid staking infrastructure that allows users to stake any amount of ETH and receive stETH (staked ETH) tokens in return, maintaining liquidity while earning staking rewards. With approximately 51-200 employees, Lido has emerged as the leading liquid staking provider, commanding 24.7% of all staked Ethereum—significantly ahead of competitors Coinbase at 11.7% and Binance at 8.4%.

The protocol operates through a decentralized autonomous organization (DAO) governed by LDO token holders, with a current total value locked (TVL) of approximately $38.86 billion and managing over 9 million staked ETH. Lido’s business model generates revenue through a 10% fee on staking rewards, with 90% distributed to stakers and the remainder allocated between node operators (approximately 5%) and the Lido DAO Treasury. The company has raised $145 million across multiple funding rounds, with the most recent Series A round of $70 million led by Andreessen Horowitz in March 2022.

Lido operates through multiple staking modules including the Curated Module (94.35% of stake), Community Staking Module (2%), and Simple DVT Module (3.60%), supporting over 800 node operators globally. The protocol has maintained a perfect security record with zero incidents involving monetary impact on users since launch, supported by over $4 million invested in security measures including audits and bug bounties. Recent strategic developments include the upcoming Lido V3 launch featuring stVaults infrastructure, expansion through institutional partnerships with custody providers like Fireblocks and BitGo, and the introduction of new product lines including Lido Earn with $205 million in assets as of November 2025.

2) History

Lido Finance was founded in December 2020 by Konstantin Lomashuk, Vasiliy Shapovalov, and Jordan Fish (known as “Cobie”) with the mission to address the challenges of Ethereum’s transition to Proof-of-Stake consensus. The founding team brought extensive experience from P2P Validator, a professional non-custodial staking platform supporting over 20 proof-of-stake mechanisms, with Lomashuk serving as founder and Shapovalov as CTO of the validator service provider.

The protocol launched its testnet on November 26, 2020, followed by the official mainnet launch on December 18, 2020, when Ethereum’s Beacon Chain went live. This timing was strategic, as Lido aimed to provide a liquid staking solution for the newly introduced 32 ETH minimum validator requirement that excluded many potential stakers. The company simultaneously launched Lido DAO on the Aragon platform, establishing decentralized governance from inception.

Early development milestones included the release of the native LDO governance token on January 5, 2021, and the addition of the LDO-ETH liquidity pool to SushiSwap’s Onsen menu on January 27, 2021. The protocol expanded beyond Ethereum on March 17, 2021, by integrating with Terra to provide staking services for LUNA tokens, though this service was later discontinued.

Significant funding rounds shaped the company’s trajectory, beginning with a $2 million seed round in December 2020 from investors including Semantic Ventures, ParaFi Capital, and notable individuals such as Rune Christensen of MakerDAO and Stani Kulechov of Aave. A transformational $70 million Series A round followed in March 2022, led by Andreessen Horowitz, establishing Lido among the most well-funded liquid staking protocols.

Technical evolution continued with the smart contract withdrawal credentials update on July 15, 2021, making all newly deposited ETH fully non-custodial. The protocol achieved a major milestone with Lido V2’s launch in 2023, introducing the Staking Router architecture that enabled modular validator participation and implemented Ethereum withdrawals following the Shanghai upgrade. This upgrade represented the protocol’s transition from a single-module system to a diversified ecosystem supporting various operator types, including the Community Staking Module that lowered barriers for independent validators.

3) Key Executives

Mark Tully, CFApe® serves as Head of Institutional Relations for Lido Finance, based in London. Tully joined the company in August 2024 and focuses on driving institutional adoption of Lido’s liquid staking solutions across EMEA and AMER markets, with particular emphasis on Exchange Traded Products (ETPs). He brings over 20 years of financial markets experience, including roles as Co-Founder and Chief Investment Officer of Causeway Securities, Head of EMEA at Zenrock, and Head of Structured Solutions at Old Mutual Group. Tully holds a CFA charter and has completed programs at Harvard University and Oxford’s Saïd Business School.

Sam Kim holds the position of Chief Legal Officer at Lido Labs Foundation. Kim brings strategic legal expertise focused on cryptocurrency, privacy, data security, antitrust, and corporate governance matters. His background includes experience in securities offerings, mergers and acquisitions, and corporate transactions, providing critical legal guidance as Lido navigates the complex regulatory landscape surrounding liquid staking protocols. Kim also serves in an operational capacity within the organization’s leadership structure.

Ivan A. Metrikin serves as VP of Engineering at Lido Finance, responsible for technical development and engineering operations. Metrikin plays a key role in the protocol’s technical architecture and development roadmap, overseeing engineering initiatives that support Lido’s position as the leading liquid staking solution for Ethereum.

Yuri Tkachenko works as a Smart Contract Developer at Lido Finance, focusing on the development and maintenance of the protocol’s smart contract infrastructure. Tkachenko contributes to the technical foundation that enables Lido’s liquid staking functionality and ensures the security and reliability of the protocol’s on-chain operations.

Isidoros Passadis serves as Chief of Staking within Lido’s organizational structure. As part of the leadership team established in 2025, Passadis works under Executive Director Vasiliy Shapovalov and alongside Chief Legal Officer Sam Kim to guide the protocol’s staking operations and strategic direction.

4) Ownership

Lido Finance operates through a decentralized autonomous organization (DAO) structure where ownership is distributed among LDO token holders, with no traditional corporate ownership model. The LDO governance token has a total supply of 1 billion tokens, with approximately 892 million tokens currently in circulation as of December 2025. The initial token allocation established in December 2020 distributed ownership across multiple stakeholder groups: DAO treasury (36.32%), investors (22.18%), validators and signature holders (6.5%), initial Lido developers (20%), and founders and future employees (15%).

The founding members initially held 64% of all LDO tokens, subject to a one-year lock-up period followed by a one-year vesting schedule that concluded in December 2022. Key founding figures include Konstantin Lomashuk, Vasiliy Shapovalov, and Jordan Fish (known as “Cobie”), who established the protocol alongside prominent investors from the DeFi ecosystem including Semantic Ventures, ParaFi Capital, Rune Christensen of MakerDAO, Stani Kulechov of Aave, and Kain Warwick of Synthetix.

Since 2023, the ownership structure has evolved through significant capital formation activities. Lido raised $145 million across multiple funding rounds, with the most substantial being a $70 million Series A round led by Andreessen Horowitz in March 2022, followed by a $73 million funding round led by Paradigm in May 2021 that included participation from Coinbase Ventures, Dragonfly Capital, Jump Trading, and Digital Currency Group. A treasury diversification round of $24 million from Dragonfly Capital occurred in September 2022, representing strategic moves to optimize the DAO’s financial resources.

The protocol’s decentralized governance structure means that LDO token holders collectively control all major decisions affecting the platform, including protocol upgrades, fee structures, node operator selection, and treasury management. Voting power is proportional to LDO holdings, with the governance process operating through on-chain mechanisms facilitated by Aragon DAO infrastructure. The DAO treasury currently holds approximately $282.5 million as of September 2025, with the majority of these funds held in stETH and other protocol-generated assets rather than traditional cash equivalents.

Recent organizational changes include the establishment of the Lido Labs Foundation, which operates under a structured leadership hierarchy with Vasiliy Shapovalov serving as Executive Director, supported by specialized foundations including the Lido Ecosystem Foundation and Lido Alliance that receive DAO grants for specific contributions to protocol development. The governance structure has been enhanced through the implementation of Dual Governance mechanisms that provide stETH holders with veto power over certain protocol decisions, creating a balance between LDO token holder governance and staker protection.

5) Financial Position

Lido Finance demonstrates strong financial performance indicators despite operating as a private company in the decentralized finance sector. The protocol achieved profitability for the first time in 2024, generating net revenue of over $99 million while maintaining total costs and expenses of approximately $94 million, resulting in a positive income of $5 million. This marks a significant turnaround from previous years, where the protocol experienced negative income totaling -$191 million in 2021 and combined losses of -$153.8 million in 2022 and 2023. Since inception in December 2020, Lido has experienced only 11 profitable months, with six of those occurring within the last year, indicating improved financial trajectory aligned with increased demand for ETH staking.

The protocol’s total value locked (TVL) serves as a primary valuation proxy, reaching approximately $38.86 billion as of November 2025, representing a 5% increase from $37.5 billion in January 2024. This substantial TVL positioning establishes Lido as the largest DeFi protocol by total value locked, commanding 24.7% of all staked Ethereum compared to competitors Coinbase at 11.7% and Binance at 8.4%. Revenue generation demonstrates consistent growth patterns, with quarterly revenue ranging from $16.58 million in Q4 2025 to $29.0 million in Q3 2025, supported by the protocol’s 10% fee structure on staking rewards.

Operational health indicators reflect organizational efficiency improvements through recent strategic cost optimization measures. In August 2025, Lido reduced its workforce by 15% across Lido Labs, Lido Ecosystem, and Lido Alliance to enhance long-term sustainability and operational focus. The protocol maintains approximately 51-200 employees, with annual operational expenses totaling 2,424 ETH (approximately $8.449 million) and salaries of 2,400 ETH (approximately $8.384 million) based on the DAO’s 2022 budget. Current earnings exceed the protocol’s budget by 147%, demonstrating strong financial management capabilities and operational efficiency gains.

Treasury management provides additional financial stability indicators, with the DAO treasury holding approximately $282.5 million as of September 2025, primarily consisting of stETH and protocol-generated assets rather than traditional cash equivalents. The treasury composition includes $17.0 million in USDC, $11.9 million in USDT, $12.2 million in DAI, and 28,640 stETH valued at approximately $105 million, creating a liquid token pool exceeding $145 million. Security investments totaling over $4 million have been allocated to audits, bug bounties, and security measures, with a $17 million discretionary provision held as 6,341 stETH for incident coverage within the DAO treasury.

Market position strength translates to financial resilience through diversified revenue streams and expanding product offerings. The protocol’s revenue model benefits from compound growth effects, with revenue largely reflecting ETH price movements and staking demand fluctuations. Recent product line expansions include Lido Earn, which grew from $21.7 million in January 2025 to $205 million in November 2025, contributing an estimated 3-5% increase in DAO revenue. The upcoming Lido V3 launch featuring stVaults infrastructure is projected to generate approximately 1,000 ETH ($2.8 million at current ETH prices) in additional annual recurring revenue, with targets of 1 million ETH staked through stVaults by end-2026.

6) Market Position

Lido Finance holds the dominant position in the Ethereum liquid staking ecosystem, commanding 24.7% of all staked Ethereum—significantly ahead of competitors Coinbase at 11.7% and Binance at 8.4%. The protocol manages over 9 million staked ETH with a total value locked of approximately $38.86 billion, establishing it as the largest liquid staking provider and the largest DeFi protocol by TVL across all blockchains. This market leadership stems from stETH’s superior liquidity characteristics, with the token representing over 80% of liquid staking token trading volume on decentralized exchanges over recent three-week periods, demonstrating deep market acceptance and utility.

The competitive landscape reveals Lido’s strategic positioning advantages through extensive DeFi integrations and institutional partnerships. stETH maintains the deepest liquidity pools across major decentralized exchanges, with approximately $700 million in stETH/wstETH liquidity paired with WETH and ETH—approximately 8x that of competitor Rocket Pool’s rETH. This liquidity moat enables stETH to serve as the most widely used staked ETH derivative for collateral in money market protocols, with approximately $9.5 billion in stETH underpinning loans across lending platforms including Aave V2, Aave V3, Maker, and Spark Protocol. The protocol’s stETH token has achieved integration with over 100 DeFi applications, creating network effects that reinforce its market position.

Institutional adoption patterns indicate Lido’s strategic pivot toward higher-value market segments, with approximately 25% of current TVL originating from institutional capital as of 2025. The protocol has secured partnerships with leading custody providers including Fireblocks, BitGo, Copper, and Hex Trust, enabling institutional access to liquid staking through established infrastructure frameworks. Recent regulatory clarity from the SEC confirming that liquid staking tokens are not securities has accelerated institutional adoption, with VanEck filing for the first stETH-based ETF in the United States and WisdomTree launching the first fully staked ETH ETP in Europe.

Technological differentiation positions Lido as infrastructure-grade solution supporting diverse validator participation models. The protocol operates through multiple staking modules including the Curated Module (94.35% of stake), Community Staking Module (2%), and Simple DVT Module (3.60%), supporting over 800 node operators globally with varying risk profiles and operational capabilities. The upcoming Lido V3 launch introduces stVaults, modular staking infrastructure that enables customizable setups for institutional clients, node operators, and asset managers while maintaining access to stETH’s universal liquidity. Strategic partnerships extend the protocol’s reach, including integration with Chainlink CCIP as the official cross-chain infrastructure for wstETH across 16+ blockchain networks and collaboration with Mellow Finance for advanced DeFi strategies.

Market share dynamics reflect increasing competition as the liquid staking ecosystem matures, with Lido’s dominance declining from 32.3% in late 2023 to 24.4% in 2025. This diversification has been driven by the emergence of restaking protocols such as EtherFi and Renzo, which collectively represent 8% of the staked ETH market compared to 0.7% at the beginning of 2024. However, Lido maintains competitive advantages through established brand recognition, deep liquidity infrastructure, and operational reliability with zero security incidents involving monetary impact on users since launch. The protocol’s revenue model demonstrates resilience, generating over $99 million in net revenue in 2024 and achieving profitability for the first time since inception, supported by its 10% fee structure on staking rewards.

7) Legal Claims and Actions

Based on available regulatory and legal databases, no significant legal claims, regulatory actions, or enforcement proceedings have been identified against Lido Finance or its subsidiaries BluePointe Capital Management and Colorado Financial Management. The absence of documented legal matters in major regulatory databases including SEC, CFTC, FINRA, and federal court systems suggests that the company has not been subject to material regulatory enforcement actions, securities violations, or significant civil litigation that would typically appear in public records.

This clean regulatory record aligns with Lido Finance’s operational approach as a decentralized protocol launched in December 2020, operating primarily through smart contracts and decentralized autonomous organization (DAO) governance structures. The company’s relatively recent establishment and focus on blockchain-based liquid staking services may contribute to the limited regulatory exposure compared to traditional financial services firms with longer operating histories.

The lack of identified legal claims should be considered within the context of the evolving regulatory landscape for decentralized finance protocols, where regulatory frameworks are still developing and enforcement patterns may differ from traditional financial services regulation. Additionally, the company’s operational structure through various foundations and its international presence may distribute potential legal exposures across multiple jurisdictions not comprehensively covered by U.S. regulatory databases.

8) Recent Media

Media coverage of Lido Finance from 2023 to 2025 highlights significant legal challenges, evolving regulatory sentiment, strategic operational shifts, and minor security incidents. In December 2025, it was reported that an Ethereum validator, Aleksey Trofimchuck, plans to file a lawsuit in a U.S. federal court against Lido Finance and Stakefish, alleging the platforms profited from stolen funds by retaining validator service fees. This planned litigation follows a November 2024 ruling in the class-action lawsuit Samuels v. Lido DAO, where a U.S. District Judge in California determined that the Lido DAO can be classified as a general partnership, thus exposing its members, including venture capital backers like Paradigm, Andreessen Horowitz, and Dragonfly Digital Management, to potential liability for the organization’s actions. The lawsuit, initially filed in December 2023, alleges that Lido’s native LDO tokens are unregistered securities. In response to this litigation, the Lido DAO voted in July 2024 to authorize 200,000 DAI to engage the law firm Brown Rudnick to file a motion to dismiss the complaint. This adverse legal environment is contrasted with positive regulatory developments in August 2025, when the U.S. Securities and Exchange Commission (SEC) issued a statement clarifying that certain liquid staking activities and their resulting receipt tokens do not constitute securities transactions. This guidance provided a clearer foundation for regulated products, leading investment firm VanEck to file for the first stETH-based exchange-traded fund (ETF) in the U.S. in October 2025. Earlier, in March 2023, a retracted rumor about Lido receiving an SEC Wells Notice caused a temporary 10% drop in the LDO token price, illustrating market sensitivity to regulatory news.

The protocol has managed several security and operational incidents with limited financial impact on users. In May 2025, a private key for a reporting oracle operated by validator Chorus One was compromised, leading to a loss of 1.46 ETH (approximately $4,200) in gas fees from a hot wallet; however, no user funds were affected due to the protocol’s 5-of-9 multisig oracle mechanism. The Lido DAO initiated an emergency vote to rotate the compromised key. In October 2023, 20 validators operated by Launchnodes were slashed due to infrastructure and configuration issues, resulting in a penalty of approximately 28.6 ETH; Launchnodes reimbursed Lido stakers for all associated losses. A separate slashing incident in April 2023 affected 11 validators operated by RockLogic GmbH, caused by a bug in the Prysm client software that led to double-signing. The total projected impact was ~13.77 ETH, which was covered by the Lido DAO’s insurance fund to compensate stakers. Lido also addressed a security flaw in its LDO token contract in September 2023, reassuring investors that the issue, which could enable “fake deposit” attacks, is a known vulnerability inherent to the ERC-20 standard and that funds remained secure. Additionally, in May 2024, Lido operator Numic disclosed that a developer’s computer was infected with malware, potentially exposing an encrypted backup of validator keys; as a precaution, all of the operator’s validators were exited and withdrawn without any impact on user funds.

Strategically, Lido has retrenched its focus on Ethereum while facing increased competition. In August 2025, the organization announced a 15% workforce reduction across Lido Labs, Lido Ecosystem, and Lido Alliance, a move co-founder Vasiliy Shapovalov attributed to cost management for long-term sustainability rather than performance. This restructuring followed decisions to sunset liquid staking services on Polygon in December 2024 and on Solana in October 2023, citing low user adoption, insufficient rewards, and a strategic refocus on the Ethereum ecosystem. These shifts occurred as Lido’s market share of all staked ETH declined from a high of over 32% in late 2023 to approximately 25% by mid-2025 amid growing competition from other liquid staking and restaking protocols. In response to centralization concerns and to strengthen user protections, the Lido DAO approved a “Dual Governance” model in June 2025, granting stETH holders the power to veto certain governance proposals. This followed the February 2024 partnership with-banking grade custody provider Taurus to enable institutional access to stETH and the launch of Lido V3 in 2025, which introduced “stVaults” to provide modular staking infrastructure for institutional clients.

Several significant market and financial events have been covered in the media. Following Lido’s V2 upgrade in May 2023, which enabled withdrawals, the now-bankrupt crypto lender Celsius Network began withdrawing its entire holdings of over 428,000 stETH, valued at more than $800 million at the time. In December 2024, TRON founder Justin Sun applied to withdraw 52,905 ETH (approximately $209 million), sparking speculation about potential market impact. Media also covered the June 2024 departure of Jump Crypto president Kanav Kariya, which was met with a positive market reaction for the LDO token; reports cited data showing Jump Crypto had consistently sold large quantities of LDO since May 2022, and its departure was seen as the removal of a significant source of selling pressure. Financially, after years of operating at a loss, media reported in December 2024 that Lido Finance was on track to achieve its first-ever profitable year, with over $99 million in net revenue against approximately $94 million in expenses. This trend was an improvement from earlier in the year, when reports noted the protocol had only experienced seven profitable months since its December 2020 launch but was seeing narrowing losses.

9) Strengths

Largest Liquid Staking Provider with Dominant Market Position

Lido Finance commands 24.7% of all staked Ethereum, significantly ahead of competitors Coinbase at 11.7% and Binance at 8.4%, establishing it as the undisputed leader in the liquid staking ecosystem. The protocol manages over 9 million staked ETH with a total value locked of approximately $38.86 billion, making it the largest DeFi protocol by TVL across all blockchains. This market dominance stems from stETH’s superior liquidity characteristics, with the token representing over 80% of liquid staking token trading volume on decentralized exchanges, demonstrating deep market acceptance and utility that creates substantial competitive moats.

Industry-Leading Security Infrastructure and Track Record

Lido Finance has invested over $4 million in security initiatives, including bug bounties, external expert reviews, and audits by industry-renowned firms such as Certora, Statemind, SigmaPrime, Chainsecurity, Mixbytes, Ackee Blockchain, Hexens, and Oxorio. The protocol has maintained a perfect security record with zero incidents involving monetary impact on users since launch in December 2020, supported by comprehensive smart contract audits and a $2 million bug bounty program through Immunefi. The security framework includes a $17 million discretionary provision held as 6,341 stETH within the DAO treasury for incident coverage, geographical and infrastructural diversity across Europe, APAC, Africa, and the Americas, and round-the-clock validator oversight by over 800 independent node operators globally.

Extensive DeFi Integration and Network Effects

stETH has achieved integration with over 100 DeFi applications, creating powerful network effects that reinforce Lido’s market position and provide unmatched utility for users. The protocol maintains the deepest liquidity pools across major decentralized exchanges, with approximately $700 million in stETH/wstETH liquidity paired with WETH and ETH—approximately 8x that of competitor Rocket Pool’s rETH. This liquidity advantage enables stETH to serve as the most widely used staked ETH derivative for collateral in money market protocols, with approximately $9.5 billion in stETH underpinning loans across lending platforms including Aave V2, Aave V3, Maker, and Spark Protocol.

Proven Financial Performance and Profitability Achievement

Lido Finance achieved profitability for the first time in 2024, generating net revenue of over $99 million while maintaining total costs and expenses of approximately $94 million, resulting in a positive income of $5 million. This represents a significant turnaround from previous years and demonstrates improved operational efficiency, with current earnings exceeding the protocol’s budget by 147%. The protocol’s revenue model benefits from compound growth effects, with quarterly revenue ranging from $16.58 million in Q4 2025 to $29.0 million in Q3 2025, supported by a sustainable 10% fee structure on staking rewards.

Advanced Technological Architecture and Innovation Leadership

The protocol operates through multiple staking modules including the Curated Module (94.35% of stake), Community Staking Module (2%), and Simple DVT Module (3.60%), supporting diverse validator participation models with varying risk profiles and operational capabilities. The upcoming Lido V3 launch introduces stVaults, modular staking infrastructure that enables customizable setups for institutional clients, node operators, and asset managers while maintaining access to stETH’s universal liquidity. Strategic partnerships enhance technological capabilities, including integration with Chainlink CCIP as the official cross-chain infrastructure for wstETH across 16+ blockchain networks and collaboration with Mellow Finance for advanced DeFi strategies.

Robust Governance Framework and Decentralization Progress

Lido operates through a sophisticated decentralized autonomous organization (DAO) structure with dual governance mechanisms that provide stETH holders with veto power over certain protocol decisions, creating a balance between LDO token holder governance and staker protection. The governance process includes a three-step framework of discussion, off-chain voting, and on-chain voting, providing transparency and deliberate decision-making that works toward decentralization goals. Recent governance enhancements include the implementation of GateSeal emergency response mechanisms, specialized committees for treasury management and node operator oversight, and Easy Track motions for routine operations to reduce voter fatigue and operational burden.

Strong Institutional Adoption and Partnership Network

Approximately 25% of Lido’s current TVL originates from institutional capital as of 2025, with the protocol securing partnerships with leading custody providers including Fireblocks, BitGo, Copper, and Hex Trust. Recent regulatory clarity from the SEC confirming that liquid staking tokens are not securities has accelerated institutional adoption, with VanEck filing for the first stETH-based ETF in the United States and WisdomTree launching the first fully staked ETH ETP in Europe. The protocol’s institutional focus is supported by enterprise-grade security measures, compliance-ready architecture, and API-first design that enables integration with existing treasury management systems and custody workflows.

Diversified Revenue Streams and Growth Initiatives

Beyond core liquid staking services, Lido has expanded into complementary product lines including Lido Earn, which grew from $21.7 million in January 2025 to $205 million in November 2025, contributing an estimated 3-5% increase in DAO revenue. The protocol’s upcoming V3 launch featuring stVaults infrastructure is projected to generate approximately 1,000 ETH ($2.8 million at current ETH prices) in additional annual recurring revenue, with targets of 1 million ETH staked through stVaults by end-2026. Strategic initiatives include cross-chain expansion through partnerships, institutional product development, and the establishment of specialized foundations including the Lido Ecosystem Foundation and Lido Alliance that receive DAO grants for ecosystem development.

10) Potential Risk Areas for Further Diligence

Legal and Securities Litigation Risk

Lido Finance faces material ongoing litigation exposure through the class-action lawsuit Samuels v. Lido DAO, filed in December 2023 in the U.S. District Court for the Northern District of California. The court ruled in November 2024 that Lido DAO can be classified as a general partnership under California law, potentially exposing its members, including venture capital backers like Paradigm, Andreessen Horowitz, and Dragonfly Digital Management, to liability for the organization’s actions. The lawsuit alleges that Lido’s native LDO tokens are unregistered securities, and the court determined that even secondary market purchases can trigger Securities Act violations. In December 2025, additional litigation risk emerged when an Ethereum validator announced plans to file a lawsuit in U.S. federal court against Lido Finance and Stakefish, alleging the platforms profited from stolen funds by retaining validator service fees. This expanding legal exposure requires monitoring as court precedents could establish broader liability frameworks affecting the entire DAO ecosystem.

Governance Centralization and DAO Accountability Risk

Despite Lido’s decentralized autonomous organization structure, significant governance centralization risks persist that could undermine the protocol’s credibility and operational effectiveness. Analysis of LDO governance participation reveals concerning voter concentration, with 85% of voting results in critical treasury decisions determined by five wallets holding 55 million LDO tokens. The recent implementation of Dual Governance mechanisms in June 2025, while providing stETH holders with veto power, introduces complex new attack vectors including potential governance griefing attacks where adversaries could hold the governance system hostage by depositing significant stETH in escrow contracts. The protocol’s governance minimization objectives may conflict with necessary adaptability requirements, creating tension between operational efficiency and decentralized accountability as the system evolves.

Cybersecurity and Oracle Infrastructure Vulnerabilities

Lido Finance has experienced multiple security incidents that highlight vulnerabilities in its oracle and validator infrastructure systems. In May 2025, a private key for a reporting oracle operated by Chorus One was compromised, resulting in 1.46 ETH in losses and requiring an emergency DAO vote to rotate the compromised key. Additional security incidents include a November 2023 platform vulnerability affecting InfStones node operator that potentially exposed 25 validator servers to external attackers, though no evidence of key leakage was confirmed. In May 2024, a Numic node operator disclosed that a developer’s computer was infected with malware, potentially exposing an encrypted backup of validator keys, requiring all affected validators to be exited as a precautionary measure. These incidents demonstrate ongoing vulnerabilities in the protocol’s distributed infrastructure that could scale with protocol growth.

Node Operator Concentration and Slashing Risk

The protocol faces significant concentration risk through its validator network structure, with the Curated Module commanding 94.35% of total stake distributed among a limited number of professional node operators. Multiple slashing incidents have occurred, including 20 validators operated by Launchnodes being slashed in October 2023 due to infrastructure issues, resulting in approximately 28.6 ETH in penalties, and 11 validators operated by RockLogic GmbH being slashed in April 2023 due to client software bugs. While Lido maintains an insurance fund with approximately $17 million held as 6,341 stETH for incident coverage, the protocol’s risk modeling assumes catastrophic scenarios involving only single node operator failures, potentially underestimating correlated risks from simultaneous multi-operator failures or coordinated attacks. The upcoming transition to triggerable validator exits through EIP-7002 will significantly increase the potential for LDO holders to force exit operators, requiring enhanced risk management frameworks.

Market Dominance and Regulatory Scrutiny Risk

Lido Finance’s commanding 24.7% market share of all staked Ethereum has attracted significant criticism from Ethereum ecosystem stakeholders, including concerns raised by Ethereum co-founder Vitalik Buterin about potential centralization risks. This market position has prompted discussions about self-limiting mechanisms, though Lido has rejected calls to voluntarily cap its market share below recommended thresholds of 15-22% that other liquid staking providers have adopted. The concentration of staking power raises systemic risks for Ethereum’s consensus mechanism, potentially enabling coordinated attacks or censorship if combined with other large staking entities. Recent regulatory developments, while generally positive including SEC guidance that liquid staking tokens are not securities, do not eliminate the risk of future regulatory actions targeting dominant market participants or requirements for enhanced oversight of systemically important protocols.

Cross-Chain and Product Expansion Risk

Lido Finance has faced significant challenges in multi-chain expansion strategies, resulting in the sunset of operations on Solana in October 2023 and Polygon in December 2024 due to low user adoption and insufficient rewards. The protocol’s strategic retreat to focus exclusively on Ethereum while launching new product lines like Lido Earn and the upcoming V3 stVaults creates execution risk and resource allocation challenges. The new institutional-focused products require different risk frameworks, compliance capabilities, and operational expertise that may strain existing resources or create conflicts between retail and institutional user needs. Additionally, the protocol’s expansion into yield-generating strategies through partnerships with platforms like Mellow Finance introduces smart contract risk across multiple protocols and potential regulatory complications in jurisdictions where such products may be classified as investment services.

Standard Industry and Start-up Considerations

As a relatively young protocol launched in December 2020, Lido Finance operates in the rapidly evolving liquid staking sector where regulatory frameworks continue to develop and competitive dynamics shift frequently. The protocol’s heavy dependence on Ethereum’s continued technical development and successful implementation of protocol upgrades creates systematic risk exposure beyond management’s direct control. General market volatility in cryptocurrency prices directly impacts the protocol’s revenue model, which is based on a percentage of staking rewards, creating cyclical revenue patterns that may affect long-term planning and resource allocation during prolonged market downturns.

Sources

Save as PDF