The decentralized finance (DeFi) sector is facing a significant shift as Lido, the leading Ethereum staking protocol, reported a substantial 23% year-over-year decline in annual revenue. According to its latest financial disclosure, total revenue fell to $40.5 million for the reported year, down from $52.6 million the previous year. This development has prompted the LidoDAO to formally review a strategic LDO token buyback initiative slated for potential implementation in the second quarter of 2025.
The core of the financial report reveals a challenging period. Staking fee revenue specifically contracted to $37.4 million, a 22% drop. The decline is attributed to two primary factors: net outflows from its staking pools and a decrease in the staking annual percentage rate (APR) offered to users, which correlates with broader Ethereum network conditions and increased total staked supply. The protocol's Total Value Locked (TVL) also saw a peak decline of approximately 14%, from $21 billion to around $18 billion.
In response, the LidoDAO community is actively debating a buyback proposal. The mechanism under review would involve the protocol allocating a portion of the staking rewards it generates to purchase LDO tokens directly from the open market. The acquired tokens would then be deposited into designated liquidity pools, such as the strategic LDO/wstETH pair. The stated goals are to support the LDO token price, enhance market liquidity, and provide an alternative method of treasury management using protocol-generated fees.
Analysts point to broader market dynamics influencing Lido's results, including increased competition from other liquid staking tokens (LSTs) and restaking protocols, which have intensified competitive pressures and contributed to user outflows. The organization itself noted a migration of capital from simple Liquid Staking Derivatives toward institutional and low-risk options, as well as competition from restaking providers offering aggressive subsidies.
Concurrently, Lido is pursuing a strategic transition that includes expanding into products for institutional investors. A key example is a collaboration with WisdomTree, a firm managing $140 billion in assets, which launched an Ethereum Exchange-Traded Product (ETP) in Europe using Lido's staking infrastructure. This move follows a 15% staff cut implemented in August 2025, aimed at optimizing operational efficiency as the protocol navigates a more fragmented market.
