Lido (LDO) Crypto Report

Lido (LDO) Crypto Report

Strategic Aims

The primary strategic aim of the Lido project is to provide a liquid staking solution for proof-of-stake (PoS) cryptocurrencies, with a principal focus on Ethereum. Lido addresses the challenges of traditional staking, such as illiquidity of staked assets, minimum staking requirements, and the complexity of running a validator node. By staking with Lido, users receive a tokenized version of their staked assets (e.g., stETH for ETH), which can be used in other decentralized finance (DeFi) protocols, thereby maintaining liquidity. The project also aims to enhance the decentralization and security of the networks it supports by distributing staked funds across multiple professional node operators. A key goal is to prevent the concentration of staking power with large exchanges.

Inception and Operational Duration

The Lido protocol was launched in December 2020, coinciding with the launch of the Ethereum 2.0 Beacon Chain.

As of the current date, the project has been operational for approximately 4 years and 7 months.

Strategy Validation Analysis

Given its operational duration of over four years, the Lido project has had a substantial amount of time to demonstrate the viability of its core strategy. The widespread adoption of its liquid staking solution, evidenced by the significant total value locked (TVL) in the protocol, indicates strong market demand for its services. The continued use and integration of its liquid staking tokens (like stETH) across the DeFi ecosystem further validate its approach to solving the illiquidity problem of staked assets. The project has successfully navigated major Ethereum upgrades, such as the Merge and the Shanghai/Capella updates, demonstrating its technical competence and adaptability. Therefore, based on its operational history and market position, the project has had sufficient time to prove its strategy is not only valid but also highly successful.

Tokenomics and Backers

Tokenomics:

The native token of the Lido DAO is LDO, an ERC-20 token. The primary utility of LDO is governance. Holders of LDO can participate in the Lido Decentralized Autonomous Organization (DAO) to vote on key protocol parameters, such as fee structures, and to manage the DAO treasury.

The total supply of LDO is capped at 1 billion tokens. The initial distribution was allocated to the DAO treasury, investors, founding developers, and validators. A portion of the protocol’s staking rewards is directed to the DAO treasury, which is then used to fund development, research, and other ecosystem initiatives as decided by LDO token holders.

Backers:

Lido is backed by a number of prominent venture capital firms and individuals in the cryptocurrency space. Notable investors include:

• Andreessen Horowitz (a16z)
• Paradigm
• Semantic Ventures
• ParaFi Capital
• And other angel investors.

---

Investment Evaluation Report: The Lido DAO Token (LDO)

Date: July 19, 2025

1. Executive Summary

The Lido DAO token (LDO) presents a unique and often misunderstood investment case. Unlike many DeFi assets, LDO does not provide its holders with a direct share of the protocol’s revenue via dividends or yield. Instead, it is a pure governance token. Its value is derived entirely from the right to control the Lido protocol—a decentralized, immensely profitable, and systemically critical liquid staking service with a Total Value Locked (TVL) exceeding $55 billion.

An investment in LDO is therefore not a bet on passive income. It is a strategic, long-term investment in the belief that the power to govern a multi-billion-dollar, revenue-generating treasury will eventually accrue significant value to the token itself. This report will dissect the Lido protocol’s underlying success, the specific mechanics of the LDO token, and the competing bullish and bearish arguments that define its investment thesis.

2. The Lido Protocol: The Unquestionable Engine of Value

Before analyzing the token, it is essential to establish that the underlying protocol is neither stagnant nor unsuccessful. By any objective measure, the Lido protocol is one of the most dynamic and successful projects in the history of decentralized finance.

• Market Dominance: Lido is the undisputed leader in the liquid staking sector, particularly for Ethereum.¹ It provides a simple way for users to stake their ETH, earn network rewards, and receive a liquid token (stETH) in return, which can be used elsewhere in DeFi.²
• Massive Asset Base (TVL): As of mid-2025, Lido manages an asset base of approximately $55 billion. This makes it one of the largest DeFi protocols by assets under management.
• Robust Revenue Generation: The protocol charges a 10% commission on all staking rewards generated by the assets it manages.³ With a multi-billion dollar asset base, this translates into a formidable and consistent revenue stream, which flows directly into the DAO’s treasury.

The success of the underlying protocol is not in question. The core of the investment debate is how, or if, this success translates into value for LDO token holders.

3. The LDO Token: Mechanics and Tokenomics

• Primary Utility: Pure Governance: LDO’s sole function is to grant voting power within the Lido DAO. Token holders can propose and vote on all crucial parameters of the protocol, including fee structures, treasury spending, and the selection of node operators.
• Token Supply & Inflation: The total supply is fixed at 1 billion LDO. All initial vesting schedules for the team and investors concluded by the end of 2022. As of 2025, the only source of “new” LDO entering the market comes from the DAO treasury’s operational spending.
  • Circulating Float: Approximately 730-750 million LDO are in public circulation.
  • Non-Circulating Supply: The remaining ~250-270 million LDO reside in the DAO treasury, to be spent over time based on governance votes.
• Historical Inflation Rate: The treasury has been introducing roughly ~22 million LDO per year into the supply to fund protocol growth. This creates a predictable headwind of sell pressure.

4. The Core Investment Dilemma: Indirect Value vs. No Direct Yield

This is the central issue that makes LDO unimpressive to many investors. Staking the LDO token pays zero yield. All revenue generated by the protocol flows into the DAO treasury. The investment thesis rests entirely on the concept of indirect value accrual.

• The “Treasury Growth” Model: The argument is that as Lido’s revenue grows, the treasury it controls becomes larger and more powerful. The LDO token represents a key to this treasury and a vote on how to deploy its capital.⁴ Proponents argue that the market price of LDO should, over time, reflect the growing “book value” of the treasury it governs.
• The Opportunity Cost: Competing DeFi protocols often use more direct value accrual mechanisms, such as:
  • Fee Distribution: Paying out a share of revenue directly to token stakers as a dividend (e.g., in ETH).
  • Buyback and Burn: Using revenue to constantly buy back and destroy their own tokens, creating deflation and price support.

Lido currently does neither. An LDO holder benefits only if the market collectively decides that the governance power over the growing treasury is valuable enough to warrant a higher token price.

5. The Bull Case for LDO (The Long-Term Strategic Bet)

1. A Proxy for Ethereum’s Success: Lido is deeply intertwined with Ethereum’s proof-of-stake security model.⁵ As Ethereum grows and its native asset (ETH) appreciates, Lido’s TVL and revenue are set to grow in lockstep. LDO can be seen as a leveraged bet on the health of the entire Ethereum ecosystem.
2. The Governance Premium: Controlling a protocol that secures tens of billions of dollars and generates hundreds of millions in annual revenue is an immensely valuable position. As this influence grows, the strategic value of holding a significant LDO stake (for VCs, other protocols, or large investors) could lead to significant buy pressure independent of yield.
3. Future Optionality: The decision to not pay a dividend is a current governance policy, not an immutable law. The DAO could, at any point, vote to “turn on” a fee-sharing switch or a buyback-and-burn mechanism. An investment in LDO is also an investment in the option for this to happen in the future, which would likely serve as a massive catalyst for the price.

6. The Bear Case for LDO (The Reasons for Skepticism)

1. No Direct Yield: This is the most significant drawback. Without a direct cash flow, the valuation of LDO remains abstract and highly dependent on market sentiment. It forces holders to rely on the “greater fool” theory—that someone else will pay more for the token later.
2. Constant, Predictable Sell Pressure: The treasury’s operational spending (~22M LDO/year) is a constant headwind. While this spending is an investment in growth, it guarantees a steady stream of LDO hitting the open market, which can suppress price appreciation, especially in flat or bear markets.
3. Inefficient Capital: Critics argue that letting hundreds of millions of dollars sit in a treasury without being productively returned to token holders is a poor use of capital. That value is locked up and provides no tangible benefit to the average retail holder.

7. Conclusion for Your Report

Your initial assessment that LDO is not an impressive or dynamic asset from a direct-yield perspective is entirely correct. It is a passive instrument from a cash-flow standpoint.

However, the program behind it is extraordinarily dynamic and successful. The disconnect lies in the DAO’s current philosophy of channeling all of that success into a central treasury rather than into the pockets of token holders.

Therefore, an investment decision regarding LDO boils down to a choice between two philosophies:

• Do you require your assets to generate direct, tangible returns (yield, dividends)? If so, LDO is not a suitable investment in its current form.
• Are you willing to make a long-term, strategic bet that the indirect value of governing a critical, revenue-generating, and rapidly growing financial institution will eventually be recognized and priced into the token? If so, LDO offers a unique, albeit abstract, value proposition.

Investing in LDO is not for those seeking passive income. It is for those who believe that in the future of decentralized finance, ultimate control over the largest pools of capital and revenue will be the most valuable asset of all.

Web Resources

Resource	URL
Project Website	https://lido.fi/
Twitter	https://twitter.com/lidofinance
Blog	https://blog.lido.fi/
Discord	https://discord.gg/lido
GitHub	https://github.com/lidofinance
Governance Forum	https://research.lido.fi/
Documentation	https://docs.lido.fi/