Lido, the largest liquid staking protocol in the Ethereum ecosystem, has drawn attention recently with a new proposal put forward to its community. The move aims to capitalize on what the team sees as the “historically low” valuation of its governance token, LDO, by allocating up to 10,000 stETH, equivalent to about $20 million at current ether prices, for a buyback program.
LDO price struggles despite protocol’s strong fundamentals
According to the proposal, there is a growing gap between LDO’s market price and Lido’s underlying protocol indicators. Data presented suggests that LDO’s value relative to Ethereum is now around 70% lower compared to the past two years. Earlier this March, LDO reached an all-time low of $0.27 and now trades at approximately $0.30. The token’s total market capitalization stands at about $258 million.
Since peaking at $7.30 in 2021, LDO’s price has fallen roughly 95%. At present prices, the proposed buyback program would enable Lido to repurchase up to 65 million LDO tokens—nearly 8% of its circulating supply. This initiative is seen as a response to the perception that LDO’s price has failed to reflect improvements in the protocol’s financial performance.
While Lido’s protocol rewards have only dropped by 20% over the past two years, annual costs have improved by 13%. Meanwhile, the effective commission rate has increased to 6.11%, and the platform continues to manage 23% of all Ethereum staked on the network. Despite these positive markers, the LDO token lags behind, prompting the call for a buyback.
Buyback mechanism and operational details
Under the proposal, Lido’s growth committee would be authorized to conduct token buybacks on leading centralized exchanges such as Binance, OKX, Bybit, Gate, and Bitget. It was noted that each of these platforms currently offers over $100,000 in daily trading depth for LDO, ensuring sufficient liquidity for the intended purchases. Additionally, the Lido Ecosystem Foundation would be permitted to collaborate with market makers and external partners to streamline the buyback process.
On-chain liquidity for LDO within a ±2% price band is about $90,000, indicating that large, direct purchases could trigger short-term volatility. To mitigate this, buybacks will mostly be handled via off-chain exchanges or through market makers, thus limiting sudden price swings.
Buybacks will occur in tranches of 1,000 stETH each and will be executed individually through a dedicated governance module. After each tranche, a three-day objection period will be provided, allowing community members to voice concerns or raise challenges. The timing and speed of the buybacks will be determined by the growth committee, with the deliberate intention of avoiding overt signals to the wider market. Each tranche’s buy price will also be strictly limited, never exceeding a 3% deviation from the reference price to further protect against market distortions.
The proposal document emphasized that this is not a routine market fluctuation and described the current divergence between LDO’s price and protocol performance as one of the most pronounced to date.
Lido DAO’s move has sparked broader debate within the DeFi sector about valuation mechanisms for governance tokens. Some of the largest projects in decentralized finance, even those with strong market positions and high total value locked (TVL), continue to see their governance tokens trade below what many consider fair value if sufficient value transfer mechanisms are lacking. Thus, the case for buybacks is linked not only to Lido’s own strategy but also to larger shifts in how DeFi governance tokens are perceived by investors and the community.
