Lido DAO proposed spending up to 10,000 stETH to buy its own governance token at what it calls a historically depressed valuation. That works out to roughly $20 million at current ether prices near $2,000.
The problem is where to spend it.
Onchain LDO liquidity sits at about $90,000 of depth at plus-or-minus 2%, according to the proposal posted by the Lido Ecosystem Operations team over the weekend. The market depth measure means a transaction of that value could move the token's price by as much as 2%.
A single 1,000 stETH batch executed onchain would blow through available liquidity multiple times over, meaning Ethereum's largest liquid staking protocol has 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 permits the committee to engage market-maker partners on behalf of the Lido Ecosystem Foundation to facilitate execution.
Valuing governance
LDO hit an all-time low of $0.27 on March 7 and currently trades near $0.30, according to CoinGecko data, with a market capitalization of roughly $258 million.
The token is down more than 95% from its 2021 peak of $7.30. At current prices, the proposed buyback could use up roughly 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 that held for most of the past two years.
Net protocol rewards, in contrast, have dropped only about 20% over the same period, while costs improved 13% year-over-year and the protocol's effective take rate rose to 6.11% from 5%. Lido still holds the largest share of staked ether at around 23%, per DefiLlama.
"This is not a routine fluctuation," 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 would proceed in 1,000 stETH batches, each requiring a separate Easy Track motion — a governance 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 moves to the market, a necessary precaution given that the proposal is public. Slippage is capped at 3% below the reference price.
The deeper question the proposal surfaces is one facing DeFi governance tokens broadly. LDO's 95% drawdown from peak is extreme, but it is not an outlier in the category. A protocol that dominates its sector, generates consistent fees, and holds billions in TVL is trading at a $258 million market cap because the market has broadly repriced what a governance token is worth when it controls a fee switch but distributes nothing.
Lido's answer is to treat the dislocation as a buying opportunity. Whether that works depends on whether the market ever decides governance tokens deserve to trade on fundamentals at all.
