History of Lido Finance

Tracing the Evolution of Lido Finance (LDO): From Genesis to Dominance

Lido Finance emerged in late 2020 as a direct response to Ethereum’s transition from Proof-of-Work to Proof-of-Stake under Ethereum 2.0. The staking infrastructure was not user-friendly: validators had to commit 32 ETH, accept illiquidity until withdrawals were enabled, and manage complex node operations. Lido’s protocol introduced a liquid staking model that abstracted these pain points, allowing users to stake ETH and receive stETH in return—a derivative that maintained value parity and usability in DeFi ecosystems.

The founding team aggregated prominent web3 developers, including members from P2P Validator and other staking infrastructure projects. Lido’s initial governance was steered by a multisig controlled by its early contributors, later evolving into a more decentralized DAO structure. This decentralization journey has sparked debate, as the protocol depends on a curated node operator registry, selected through DAO governance, raising concerns over trust assumptions and validator centralization.

In early development, Lido’s primary competitor was Rocket Pool. However, Lido quickly absorbed market share through early integrations with protocols like Curve and Yearn, locking in first-mover advantage. The growth of stETH liquidity in these pools enabled Lido to establish itself as the default ETH staking provider in DeFi. This dominance has not been without consequence—critics warn of Lido-induced centralization within Ethereum's validator set, invoking echoes of centralization critiques leveled against platforms like Solana (https://bestdapps.com/blogs/news/examining-solanas-major-blockchain-criticisms) and Hedera (https://bestdapps.com/blogs/news/critiques-of-hedera-hashgraph-a-deep-dive).

The launch of the LDO token in early 2021 further complicated Lido’s governance dynamics. LDO was initially distributed to investors, founders, and treasury pools, with a relatively small portion allocated to community airdrops. While the DAO governs smart contract upgrades and node operator additions, critics argue the token’s concentration reduces meaningful community input.

The protocol’s operations extended beyond Ethereum via integrations with liquid staking on Solana, Polygon, and Kusama, though not all chains saw sustained adoption, and Solana support was eventually deprecated. These events highlight strategic misalignments and underscore the challenges of multichain expansion—issues reminiscent of the platform fragmentation explored in https://bestdapps.com/blogs/news/internet-computer-vs-rivals-a-blockchain-showdown.

Despite its innovation, Lido’s history is marred by ongoing debates around protocol resilience, governance efficacy, and systemic risk. Its climb from a staking facilitator to a central pillar in Ethereum’s staking economy raises critical questions about decentralization trade-offs inherent in today's DeFi infrastructure.

How Lido Finance Works

How Lido Finance Works: The Mechanics Behind LDO Token Utility

Lido Finance functions as a non-custodial liquid staking protocol that abstracts the complexities of staking on proof-of-stake (PoS) networks, primarily Ethereum. At its core, Lido enables users to participate in staking while retaining liquidity through its derivative token system, most notably via stETH (staked ETH).

Liquid Staking Infrastructure

Users deposit ETH into Lido’s smart contract. That ETH is then delegated across a set of pre-approved, decentralized validators. In return, users receive stETH, a liquid representation of their staked ETH that continuously rebases to reflect accrued staking rewards. This model addresses the illiquidity challenge usually associated with staking via traditional Ethereum validators—where staked ETH is otherwise locked until protocol-level withdrawals become available.

stETH acts as a yield-bearing token; its balance grows over time rather than its price increasing. This contrasts with wrapped staked ETH (wstETH), which packages the growing value as an increasing conversion ratio, making it more composable for DeFi integrations. While stETH is rebasable and primarily intended for wallets, wstETH is favored in DeFi platforms.

LDO Token Governance and Utility

LDO is Lido’s native governance token, used to vote on protocol decisions such as validator sets, fee parameters, and treasury expenditures. LDO holders participate in the DAO (Decentralized Autonomous Organization) that governs Lido. However, the voting power is currently heavily concentrated among early investors and core contributors, raising concerns around decentralized governance—a pattern not entirely unlike what exists in other ecosystems, as highlighted in https://bestdapps.com/blogs/news/unlocking-solana-the-future-of-blockchain-technology.

Lido takes a 10% fee on staking rewards, which is split between node operators and the Lido DAO treasury. The economic security of the protocol rests on a shared risk model across validators; if a validator is slashed, the risk is socialized. This design reduces individual slashing risk but may dilute accountability, a known debate point in shared-risk staking frameworks.

Smart Contract Architecture and Janitorial Risk

Though audits have been conducted, Lido’s smart contracts serve as the single point of aggregation for a large portion of staked ETH. This introduces custodial-like risk without overt custodianship—a centralization vector that has drawn scrutiny within DeFi circles. Concerns of smart contract risk align with broader DeFi platform critiques explored in https://bestdapps.com/blogs/news/the-unheard-conversation-custodial-risks-in-decentralized-finance-and-how-they-threaten-user-sovereignty.

Lido’s central role in Ethereum staking also places it under the microscope in decentralization debates, particularly with its growing influence over validator sets. This introduces potential systemic risks, especially as Ethereum transitions into a fully decentralized economic layer.

Use Cases

LDO Token Use Cases: Utility Within the Lido Finance Ecosystem

LDO, the native governance token of Lido Finance, plays a critical role in decentralizing control over the protocol's operations and enhancing protocol-level coordination. While it doesn’t serve transactional purposes like a currency, its utility lies in three functional verticals: protocol governance, incentive alignment, and protocol upgradability.

Governance Leverage in a Liquid Staking Protocol

The primary use case of LDO is protocol governance. Token holders can vote on key decisions impacting Lido’s liquid staking protocols across Ethereum and other supported chains. This includes setting staking commission rates, approving protocol upgrades, onboarding or removing node operators, and treasury management. LDO’s voting process is on-chain and executed via Aragon, exposing it to the same attack vectors or limitations inherent in DAO governance design.

Unlike some other ostensibly decentralized systems, Lido governance has been criticized for a relatively high concentration of LDO supply among its early investors and core contributors. In practice, this means that although LDO enables decentralized governance on paper, the protocol’s decision-making process can still be heavily influenced by a limited number of wallets. This centralization challenge has implications for protocol neutrality and censorship resistance—fundamental tenets for Ethereum-aligned infrastructure.

Incentive Structuring: Liquidity Mining and Alignment

While LDO isn't needed to stake ETH via Lido (the process issues stETH in return), it has been actively used for incentive alignment through liquidity mining programs. For example, LDO rewards have historically been distributed to users who provide liquidity for stETH/ETH pools on DEXs like Curve. This mechanism indirectly bootstraps the liquidity necessary for stETH to function as a composable DeFi asset.

That said, such customer acquisition strategies are cost-heavy and unsustainable in the long term. A growing critique within DeFi ecosystems—also seen in other protocols as discussed in pieces like https://bestdapps.com/blogs/news/the-unheard-conversation-custodial-risks-in-decentralized-finance-and-how-they-threaten-user-sovereignty—relates to the anti-pattern of perpetual liquidity mining diluting token value without establishing organic demand.

Enabling Protocol Upgradability and DAO Intermediation

LDO has also been used as a decision-making medium in deploying and managing Lido on non-Ethereum chains like Solana, Kusama, and Polygon. Proposals to expand or sunset deployments are often subjected to LDO voting, making the token instrumental in cross-chain strategy. This intermediation by token holders raises questions about off-chain coordination risks, the effective decentralization of Lido’s multi-chain DAO model, and susceptibility to governance attacks.

In summary, while LDO’s usage is tightly tied to protocol-level operations and strategic matters, questions around governance capture, voting apathy, and tokenomics dilution remain unresolved. The trade-offs between flexibility, decentralization, and economic sustainability define the paradox of LDO's utility in practice.

Lido Finance Tokenomics

Decoding Lido Finance (LDO) Tokenomics: A Deep Dive into Supply Dynamics and Governance Structures

LDO, the native utility and governance token of the Lido Finance protocol, is central to the operation and decentralization roadmap of the liquid staking platform. Its tokenomic structure, while designed to balance incentives for governance, node operators, and stakers, presents a complex mixture of allocations, emission schedules, and potential concentration risks.

LDO has a fixed total supply of 1 billion tokens. However, this figure by itself reveals little about the effective circulating supply—dramatically impacted by cliff and vesting schedules allocated to early investors, founders, and the Lido DAO treasury. At genesis, only a fraction of the supply was immediately liquid, with a substantial portion allocated to the DAO treasury (36.32%), initial developers (20%), investors (22.18%), validators and node operators (6.5%), and various future initiatives.

One particularly contentious design element is the high percentage of tokens controlled by the DAO treasury, which effectively consolidates governance power among a small subset of active participants. While this centralization is arguably practical for rapid development in early protocol stages, it introduces long-term concerns regarding plutocratic governance, especially when DAO voter turnout is historically low across DeFi protocols. This mirrors broader governance issues observed across projects like Dogecoin, as explored in our article on its governance dilemma.

LDO holders wield governance control over key protocol parameters—such as validator onboarding, fee structure, and treasury disbursements. However, one complication lies in the lack of direct economic utility of the token within the staking process. Users receive stETH when staking ETH through Lido, but there is no requirement to hold or stake LDO to benefit from Lido’s core functionality. This disconnection raises fundamental questions about token value accrual mechanisms.

The DAO treasury’s emission policy is also highly discretionary. There is no enforced long-term emission curve; token distribution for liquidity mining, contributor compensation, or ecosystem grants occurs via on-chain governance votes. This flexibility allows for adaptive programmatic funding but also creates unpredictability around supply inflation and dilution risk—issues also faced by other governance-heavy protocols like Internet Computer, which we looked at in Unpacking Its Biggest Criticisms.

Moreover, given that a large portion of LDO tokens remains non-circulating, the potential market impact upon unlocking is significant. Any sudden shift from treasury disbursements or investor unlocks could create significant supply shocks and distort market dynamics, calling for more nuanced emission transparency in the long term.

Lido Finance Governance

Navigating Governance in Lido Finance (LDO): Centralization Through Delegation

Lido Finance’s governance operates through the Lido DAO, primarily steered by the LDO token. As with many DAOs, token-weighted voting is the core mechanism. However, the practical decentralization of this model in Lido remains under scrutiny due to the concentration of voting power in the hands of a small number of whales and delegates.

The governance structure is largely off-chain decision-making funneled through Snapshot, with implementation typically occurring via multisig wallet operations controlled by a limited group. This bridging between intention and execution remains a delicate trust point in Lido's ecosystem — especially given the systemic importance of Lido within Ethereum staking. In effect, governance decisions impacting smart contract upgrades, validator sets, or even fee structures must pass through this semi-centralized gateway before reaching the chain.

One sticking point is the delegation power of large stakeholders. While delegating exists to encourage greater ecosystem participation, in practice, it amplifies plutocratic dynamics. For example, LDO whales can delegate voting power to a few favored delegates, which can solidify influence across multiple governance cycles. This imbalance is reminiscent of critiques also seen in other DeFi governance ecosystems like Decentralized Governance The Heart of Polygons MATIC, where a handful of participants can steer outcomes despite the veneer of democratic processes.

Lido attempted to address this by proposing a mechanism for Governance Staking, where staking LDO for voting power could introduce time-weighted participation, but the implementation has been slow. Moreover, the reluctance to adopt on-chain voting mechanisms continues to draw criticism. Without directly enforceable on-chain execution tied to DAO proposals, governance remains susceptible to human friction, delayed activation, or even denial by the multisig signers.

Validator onboarding — a direct byproduct of governance decisions — adds systemic risk. Lido's impact on Ethereum has prompted protocol-level scrutiny due to the risk of validator concentration. Any governance misstep in expanding the set of node operators, for instance, could entrench monopolistic patterns or expose the protocol to correlated failures. This mirrors centralized control criticisms explored in protocols like The Graph Governance Power to the Community, where token-weighted systems create de facto oligarchies.

Ultimately, Lido’s governance presents a tension between usability and decentralization. While the DAO enables direct community influence, the actual power structure is skewed toward large holders, casting doubt on its resilience and neutrality in Ethereum’s broader staking landscape.

Technical future of Lido Finance

Lido Finance Technical Roadmap and Development Focus

Lido Finance has established itself as the leading liquid staking protocol by supporting Ethereum, Solana (currently deprecated), Polygon, and other chains through a versatile staking infrastructure. However, this prominence has led to increased scrutiny around centralization, protocol dependencies, and smart contract rigidity. Its technical developments are aimed at both mitigating existing systemic risks and expanding support for multi-chain staking ecosystems.

A central component of Lido’s technical roadmap is the continued modularization of its staking architecture, especially within the Ethereum ecosystem. The initiative known as the “Node Operator Module Framework” is designed to enable greater customization of node onboarding logic across different modules. This separates validator selection mechanisms from core protocol logic, allowing experimentation with alternative validator set curation mechanisms—including permissionless, reputation-based, or governance-driven modules. This upgrade is instrumental in distributing risk and reducing reliance on the Lido DAO’s current governance model.

A major milestone in Lido's future development is the move toward Dual Governance for stETH and related tokens. In the current state, the LDO token governs all aspects of the protocol, including validator selection and treasury management. Future changes aim to separate economic and technical control by giving stETH holders a more active on-chain role in protocol governance. This aligns with trends seen in other ecosystems attempting to balance power between token holders and protocol participants, though skepticism remains about effectiveness without clear definitions of scope and mechanisms.

One of the more controversial aspects of Lido's growth has been its impact on Ethereum consensus decentralization. As Lido commands a large share of staked ETH, critics argue it introduces systemic risks. Lido’s development team is addressing this concern via the implementation of Distributed Validator Technology (DVT). DVT essentially splits cryptographic duties among multiple parties, reducing slashing risk, improving liveness, and increasing node diversity. The roadmap explicitly includes multi-client support and operator diversification as key deliverables in this area.

Interoperability is another important technical frontier for Lido. Development teams are experimenting with staking derivatives that could operate across different Layer-2 solutions and non-EVM chains. Upcoming abstractions via staking routers and cross-chain bridges hint toward composable staking tokens that maintain utility across multiple rollups and alt L1s, though bridging security remains an outstanding concern. These ambitions parallel broader discussions on decentralized infrastructure highlighted in pieces like the-unseen-importance-of-decentralized-oracles-in-smart-contract-reliability.

The technical roadmap avoids rigid timelines but emphasizes protocol neutralization, resilience to governance attacks, and measurable decentralization metrics. Whether Lido’s upgrades are enough to prevent further critiques around centralization remains to be seen.

Comparing Lido Finance to it’s rivals

How Lido (LDO) Compares to Rocket Pool (RPL) in the Ethereum Liquid Staking Arena

Lido (LDO) and Rocket Pool (RPL) are the two most prominent players in Ethereum's liquid staking sector, but they approach decentralization, validator participation, and protocol incentives with fundamentally different architectures.

The key divergence lies in validator accessibility. Lido delegates Ethereum staking responsibilities to a curated set of node operators selected by a DAO, enforcing quality but introducing centralization risks. In contrast, Rocket Pool offers a permissionless system where anyone holding 16 ETH and the required RPL collateral can operate a node. This theoretically flattens access, but introduces variability in validator performance and trust in protocol-level slashing insurance.

Both deploy a liquid staking token—stETH for Lido and rETH for Rocket Pool—but the mechanics differ. stETH is a rebasing token reflecting accrued staking rewards, while rETH appreciates in value over time but does not rebase. This distinction creates friction in DeFi integrations. Some protocols prefer the simplicity of non-rebasing rETH, which is easier to model for lending markets, whereas others integrate deeply with stETH due to its dominance and liquidity. However, stETH’s rebasing behavior has historically caused edge case bugs in yield aggregators and auto-compounders.

Rocket Pool also embeds RPL as a collateral and utility token for node operators, adding an internal game-theoretic layer. Misbehaving nodes may lose RPL collateral through slashing, offering some protection against validator failure. Lido, by contrast, enforces validator discipline off-chain via DAO governance and reputation-based selection, a structure that, while effective at scale, lacks punitive token-native recourse mechanisms and relies heavily on social consensus.

As of Ethereum’s scaling toward full proof-of-stake finality, the decentralization vector becomes more critical. Rocket Pool’s reliance on solo stakers and openness supports validator set diversity, aligning with long-term censorship resistance. Lido’s increasing validator footprint has raised concerns of potential capture if concentration intensifies, especially given stETH’s penetration into DeFi lending markets, where systemic risk builds rapidly with a dominant staking derivative.

Protocol-level risk mitigation strategy is also a crucial contrast. Rocket Pool’s slashing insurance via RPL incentivizes operator self-selection for trust and uptime, whereas Lido’s slashing events propagate risk across all stETH holders, as validators are pooled. This difference reshapes how risks are socialized and absorbed by users at scale.

For broader context on how decentralization strategies influence DeFi protocol design, readers may explore insights from related coverage in The Unheard Conversation: Custodial Risks in Decentralized Finance.

STETH vs LDO: Custodial Implications Within the Same Ecosystem

Although LDO and STETH are fundamentally linked—LDO being the governance token of Lido Finance and STETH serving as the liquid staking token representing staked ETH within the protocol—they functionally diverge, especially when assessing exposure, risk, and utility in decentralized contexts.

STETH is often mistaken as merely a technical representation of staked ETH, but its presence on secondary markets and DeFi protocols underscores its position as a standalone crypto asset. Unlike LDO, which allows holders to vote on protocol changes and control treasury assets, STETH offers no governance function. It accrues staking rewards directly, making it attractive to capital-efficient DeFi strategies. This reward accrual, however, introduces a central tension: the reliance on Lido’s validator set and the custodial risk embedded in its withdrawal and rebasing mechanics—as explored in critical reviews on custodial practices across DeFi sectors like https://bestdapps.com/blogs/news/the-unheard-conversation-custodial-risks-in-decentralized-finance-and-how-they-threaten-user-sovereignty.

STETH’s semi-custodial model diverges from pure self-custody principles. While it supports integrations with DeFi protocols such as Curve and Aave, allowing liquidity and composability, it still depends on Lido’s smart contract infrastructure to finalize withdrawals and reward tracking. Validators are selected through Lido DAO governance, and that brings up an indirect coupling to LDO since governance over validator approval is exerted by LDO holders. Consequently, users of STETH carry exposure to protocol governance decisions they do not participate in.

Moreover, STETH introduces potential recursive risk—it is often used as collateral in lending markets, creating systemic leverage on an LSD (liquid staking derivative) that itself is redeemable only through an ethereum unstaking queue. In the event of slashing or validator underperformance, STETH holders face delays or partial losses, yet lack control over validator behavior. In contrast, LDO holders can influence such operational parameters.

Also worth noting is STETH’s role as a price discovery vehicle. While it generally tracks ETH, any deviation introduces risk arbitrage. For users staking via Lido, STETH exposure is unavoidable, but holding STETH alone—absent LDO—leaves users subject to a governance layer they cannot affect, misaligning incentives in broader DeFi participation.

These governance asymmetries and underlying centralization vectors position STETH not just as a staking derivative, but as a test case for decentralized protocol trust modeling. Understanding the dual-token mechanics is essential for users building complex strategies around STETH-labeled capital.

Lido (LDO) vs. CBETH: A Deep Comparative Look at Ethereum Staking Efficiency and Design

As institutional Ethereum staking matures, a direct comparison between Lido’s LDO and Coinbase’s CBETH reveals critical differences in validation architecture, custodianship, liquidity dynamics, and trust assumptions. Analyzing CBETH under the lens of Lido offers insight into centralized staking trade-offs vs decentralized staking supremacy.

CBETH is a tokenized representation of staked ETH through Coinbase’s custodial staking infrastructure. Unlike Lido’s liquid staking model where users remain non-custodial via smart contracts and distributed validator sets, CBETH is custodial by design—Coinbase holds and controls the underlying ETH. This design choice has direct implications. While it reduces the protocol design complexity and leverages Coinbase’s brand trust, it introduces a single point of failure and governance centralization. In contrast, Lido has implemented mechanisms for distributed validator node operators, slashing protection, and DAO-driven governance, protecting against unilateral control.

CBETH also lacks the auto-compounding mechanism inherent in Lido's system. Instead of rebasing to increase the quantity of CBETH each user holds as rewards accrue, CBETH appreciates in value relative to ETH. This construct results in complex UX design decisions and incompatibilities with DeFi protocols expecting rebasing or balance-changing tokens. DeFi integrations for CBETH are therefore more limited. Lido’s stETH, being non-rebasing and more DeFi-native due to its early integrations across Aave, Curve, and Balancer, currently holds a liquidity and composability edge.

Conversion and exit mechanics also diverge sharply. Lido’s ETH unstaking route leverages protocol-managed infrastructure with a built-in withdrawal queue. CBETH users, on the other hand, must often sell CBETH on secondary markets to access ETH liquidity—introducing slippage and dependency on CEX order books. This makes CBETH less suitable as native collateral in trust-minimized systems, something that DeFi composability critiques frequently highlight.

Finally, from an issuance and control standpoint, users must trust CBETH’s smart contracts and token supply management entirely to Coinbase—a centralized entity subject to regulatory issues, backend custodial mismanagement, or internal policy shifts. Such trust models contrast Lido’s community-driven governance where tokenholders exert direct influence via DAO proposals and validator on/offboarding. While this decentralization introduces its own set of challenges, it enhances censorship resistance and aligns better with core Ethereum values.

In summary, CBETH represents a security-first, custodial model appealing to regulated institutions and CEX-reliant users, whereas LDO’s stETH dominates the DeFi-native liquid staking vertical through decentralization, composability, and smarter liquidity design.

Primary criticisms of Lido Finance

Key Criticisms of LDO and the Lido Protocol: Centralization, Governance, and Validator Risk

Despite Lido Finance's dominant role in Ethereum liquid staking, the protocol is not without significant concerns. At the center of the most pressing criticisms lies the issue of centralization—a paradox given Lido’s core positioning within the decentralized finance (DeFi) ecosystem.

Centralization Concerns in Validator Set and Governance

Lido controls a substantial portion of all staked ETH. While this provides users with a convenient means to earn staking rewards without locking their assets, it raises a fundamental problem for Ethereum’s network security. Concentrating such a significant portion of staked ETH under Lido's umbrella effectively centralizes consensus power. In Ethereum's proof-of-stake paradigm, this level of control can threaten validator diversity, forming a potential cartel risk that runs counter to the network’s decentralization ethos.

The governance of Lido is another flashpoint. The LDO token governs protocol decisions, including validator onboarding and fee structures. However, voter participation is low, and token distribution skews heavily toward early investors and Lido insiders. This dynamic contradicts the ideals of community-led governance and undermines the legitimacy of Lido’s decision-making process. Governance capture becomes a tangible risk, where influential stakeholders can dictate protocol evolution for self-interest rather than ecosystem health.

Smart Contract Risk and Custodial Concentration

Another recurring issue is the inherent risk in Lido’s smart contracts. As a liquidity derivative protocol, Lido wraps staked ETH into stETH, introducing additional layers of contract logic. If exploited, these contracts can become routes for disastrous systemic failures—not just for Lido users, but for any DeFi protocol integrated with stETH as collateral. While audits and bug bounties mitigate such risks, they cannot eliminate them entirely.

This ties into broader concerns about custodial concentration in DeFi, as explored in https://bestdapps.com/blogs/news/the-unheard-conversation-custodial-risks-in-decentralized-finance-and-how-they-threaten-user-sovereignty. Lido becomes a central DeFi interdependency; if compromised, its failure could ripple across protocols using stETH in lending, yield farming, and liquidity provisioning.

Inflexibility and Exit Liquidity Risks

There are concerns over exit liquidity dynamics and redemption bottlenecks in turbulent markets. Users holding stETH depend on secondary markets (like Curve or DeFi aggregators) for liquidity. In times of high volatility or depegging, stETH may trade below ETH, limiting users’ ability to exit without significant losses—highlighting a mismatch between promised liquidity and operational reality.

Together, these issues suggest Lido is walking a delicate line between functional dominance and systemic risk concentration.

Founders

Behind the Code: The Founding Team of Lido Finance

Lido Finance's inception was less about a single founder and more about a consortium of crypto-native contributors rallying around Ethereum’s staking problem. Unlike projects with a defined founder-figure like Vitalik Buterin or Anatoly Yakovenko, Lido was formed by developers and entities aligned with crypto ideals of decentralization and staking accessibility. At the core are members from P2P.org, KR1, and Semantic VC, along with several independent early Ethereum builders. Pseudonymity plays a role in some contributions—aligning with other DeFi-originated DAO projects—but it doesn’t absolve questions around decision-making transparency.

The most publicly recognized figures behind Lido include Vasiliy Shapovalov and Konstantin Lomashuk, co-founders of P2P Validator. P2P had already built a strong validator business across proof-of-stake networks before Lido, serving platforms like Cosmos and Tezos. Their infrastructure-heavy approach positioned P2P as a central node in Lido's early validator coordination. However, some in the community have questioned the validator centralization risk arising from P2P’s outsized influence on early protocol design and DAO governance mechanisms.

Lomashuk, for instance, is a participant in both technical discussions and early governance processes, intersecting multiple layers of the Lido DAO. This cross-functional involvement is not uncommon in DAO projects but has drawn criticism from those who argue it raises conflict of interest and decentralization theater concerns.

The Lido DAO, while decentralized in tokenomics, initially operated with a Group-of-Few model, where decision-making was guided by a core group of multisig holders. Although this structure was framed as a bootstrapping necessity, critics argued it gave excessive power to a non-transparent group—many of whom were early backers or had commercial relationships with the protocol. This structure contrasts with other governance models in the ecosystem, such as discussed in the governance model of The Graph which emphasizes community-driven control from an earlier stage.

Instead of a developer-first branding like that of Solana’s Anatoly-driven narrative (read more on Solana's founders), Lido’s founding team remains more infrastructure and VC-rooted. While this has led to rapid staking adoption, some within Ethereum circles continue to voice concerns over the social layer’s opacity, especially regarding off-chain influence from initial contributors.

In contrast, the DAO has made incremental strides toward governance transparency and validator diversification—though critics still debate whether these efforts are symbolic more than structural. Ultimately, Lido's founding DNA blurs lines between decentralization principles and startup pragmatism, raising ongoing questions about true protocol autonomy.

Authors comments

This document was made by www.BestDapps.com

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