What are the main risks of holding Lido DAO?
Holding Lido DAO carries code, slashing, depeg and governance risks for holders, and US regulators treat LDO spot markets as largely unregulated.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
- Audits reduce code risk but do not remove it.
- A few large holders can steer Lido governance.
- LDO wallets are targets for phishing and hacking.
Lido is a liquid staking service for ether.
What are the main risks?
The main risks for LDO holders come from the code, the validators, the stETH peg, governance and US law. Governance capture is the danger that a few large holders coordinate votes in their own favor.
What is Lido DAO?
LDO is the governance token for Lido's liquid staking protocol, and it is not stETH. stETH is a transferable token for a staked ether position, while LDO carries a vote. LDO pays no staking yield, and demand for it usually follows how much ether people stake through Lido.
What can break Lido?
Smart contract bugs can freeze or misdirect funds, and an exploit can damage confidence even when the staked ether is safe. Validator slashing takes a penalty out of that ether. A stETH depeg or a long withdrawal queue can push users to competing services.
What legal risks exist?
US regulators have sued DAOs and staking services. In 2023 the CFTC won a default judgment against Ooki DAO, which it sued directly. In February 2023 the SEC settled with Kraken over its US staking service.
Frequently asked questions
No. stETH represents a staked ether position; LDO is a voting token.
No. The rewards belong to the staked ether, not to LDO.
Yes. A regulator can name a DAO as the defendant, and the CFTC did so with Ooki DAO.
Less ether staked through Lido leaves less for the token to govern.
