Lido DAO's $145 Million Treasury Fuels Debate Over Proposed 70% LDO Buyback

Lido DAO, the decentralized autonomous organization governing the leading liquid staking protocol Lido Finance, is currently deliberating a proposal to implement a dynamic LDO token buyback program. The initiative aims to utilize a significant portion of the DAO's substantial treasury surplus, which currently stands at over $145 million, rather than protocol revenue. The proposal has sparked considerable discussion within the community, with some, like DeFi commentator Lorenzo Valente, expressing reservations, stating, "I think the proposal comes from a good place but honestly, it’s too early and feels like a bad idea."

The proposal, put forth by community member Kuzmich, suggests allocating 70% of the DAO's liquid assets for periodic LDO buybacks. These assets include $17 million USDC, $11.9 million USDT, $12.2 million DAI, and approximately $105 million in stETH. A dynamic safeguard mechanism is integrated, which would reduce buybacks to 50% if the treasury falls between $50 million and $85 million, and pause them entirely below $50 million to maintain operational stability.

Proponents of the buyback program argue it would strengthen LDO's market value, reward long-term contributors, and encourage governance participation by putting idle capital to work. The core objective is to restore confidence in the token's value and establish a cyclical token economy where bought-back LDO can be strategically redeployed for future development and incentives.

However, the proposal has encountered notable criticism. Community member Ertagon on the Lido Research Forum highlighted concerns about "potential for volatility," suggesting that buybacks tied to treasury thresholds could lead to "cliff moments" and market front-running. He also pointed out a "weak link to protocol fundamentals," arguing that treasury fluctuations might not accurately reflect Lido's operational health. Alternatives, such as LDO staking with fee sharing, have been suggested as a potentially more sustainable approach that better aligns value with the protocol's core success.

This internal debate unfolds as LDO has recently experienced a significant price surge, partly attributed to broader positive developments in the crypto market. These include increased regulatory clarity from the U.S. Securities and Exchange Commission (SEC) regarding liquid staking activities and BlackRock's application for a spot Ethereum ETF that includes a staking mechanism. The buyback proposal is currently undergoing community feedback and is scheduled for a discussion on August 14, with a Snapshot vote potentially set for August 25, marking a critical period for the future direction of Lido's treasury management.