Lido DAO proposed using up to 10,000 stETH to buy its own government token at what it calls a historically depressed valuation. That equates to about $20 million at current ether prices near $2,000.
The problem is where to use it.
Onchain LDO liquidity sits at around $90,000 at the depth of plus-or-minus 2%, according to the proposal the Lido Ecosystem Operations team issued over the weekend. The market depth measure means that a transaction of this value can move the token’s price by as much as 2%.
A single 1,000 stETH batch executed on-chain would blow through available liquidity several times over, meaning Ethereum’s largest liquid stake protocol would have to go offchain to buy its own token at scale.
The proposal authorizes the Lido Growth Committee to route trades through centralized exchanges, including Binance, OKX, Bybit, Gate and Bitget, each of which currently offers more than $100,000 in depth. It also allows the committee to engage market-making partners on behalf of the Lido Ecosystem Foundation to facilitate execution.
Appreciation of management
LDO hit an all-time low of $0.27 on March 7 and is currently trading near $0.30, according to CoinGecko data, with a market cap of around $258 million.
The token has fallen more than 95% from its 2021 peak of $7.30. At current prices, the proposed buyback could use about 65 million tokens, or about 8% of the circulating supply.
The DAO’s case rests on a gap between token performance and protocol fundamentals. The LDO to ETH ratio sits at approximately 0.00016, a 70% discount to levels held for most of the past two years.
In contrast, net protocol rewards have only fallen about 20% over the same period, while costs have improved by 13% year-over-year, and the protocol’s effective take rate increased to 6.11% from 5%. Lido still has the largest share of staked ether at around 23% per DefiLlama.
“This is not a routine change,” the proposal states. “It represents one of the most significant dislocations between LDO’s market price and its underlying protocol fundamentals in the token’s history.”
Execution will continue in 1,000 stETH batches, each requiring a separate Easy Track move – a control mechanism for routine or approved operations – with a three-day objection period. The Growth Committee retains discretion over timing and pace to avoid signaling exact movements to the market, a necessary precaution since the proposal is public. Slippage is limited to 3% below the reference price.
The deeper question that the proposal raises is one that largely faces DeFi governance tokens. The LDO’s 95% pull from peak is extreme, but it’s not an outlier in the category. A protocol that dominates its sector, generates uniform fees and holds billions in TVL is trading at a market cap of $258 million because the market has largely changed what a governance token is worth when it controls a fee shift but distributes nothing.
Lido’s answer is to treat the dislocation as a buying opportunity. Whether it works depends on whether the market ever decides that governance tokens even deserve to trade on fundamentals.
