Utilizing Market Opportunities: stETH / LDO trade

[lidoecosystem-ops]

TL;DR

The proposal seeks to authorize the Lido Growth Committee to execute the accumulation of LDO using up to 10,000 stETH from the Lido DAO Treasury outside of the automated NEST format. The execution will be managed via the Lido Ecosystem Foundation, provided current market conditions prevail. Once acquired, the LDO will be returned to the Treasury, and the Growth Committee will provide a full execution report.

Disclaimer

This proposal is not an addition, specification or replacement for Liquid Buybacks: NEST execution with LDO/wstETH liquidity proposal. NEST aims to establish a long-term automated solution when to acquire LDO based on protocol performance and ETH price, and to improve on-chain liquidity, if approved, while the current proposal is an one-off initiative to utilize market opportunities.

Motivation

LDO is trading at historically depressed levels relative to ETH. The LDO:ETH ratio currently sits at approximately 0.00016, a 63% discount to the 2-year median of 0.00043, and a 70% discount to the ~0.0005 that characterized most of the prior two years.

This is not a routine fluctuation. It represents one of the most significant dislocations between LDO’s market price and its underlying protocol fundamentals in the token’s history.

LDO:ETH ratio over past two years from Coingecko

Source: https://dune.com/steakhouse/lido-safu

Critically, that dislocation is not justified by a proportional deterioration in protocol performance. Net protocol rewards are down approximately 20% over the same period in which the LDO:ETH ratio has fallen ~50%. Costs improved 13% year-over-year (2025 vs. 2024), while the protocol’s take rate increased from 5% to 6.11%, improving fee capture despite a market backdrop. Lido continues to lead as the dominant liquid staking middleware by TVL, with consistent fee generation and a resilient node operator network.

This is ultimately a capital allocation decision: whether to deploy resources in a way that balances potential upside with associated risks, while also supporting the protocol’s long-term development.

Implementation Details

• Budget: Up to 10,000 stETH

• Execution Trigger
  Execution of 1k stETH batches with pre-defined caps on the execution price published prior to the Easy Track motion on the forum (in this proposal thread). Each batch will pull funds via Easy Track from treasury with tokenholders being able to reject a motion and decide when to stop. Example: “1. motion to draw 1k stETH to buy LDO with (st)ETH over the Execution Window up to an ETH/LDO ratio of 0.0001x. Execution Window: ≤ x months” published on the forum on (t). After t+2 days, an Easy Track motion with a three day objection period can be started by the Growth Committee.

• Tolerable Slippage Threshold: ≤ 3%, i.e. worst acceptable execution price below reference price

• Execution Window: The execution window will be specified prior to each Easy Track drawdown. The Growth Committee retains discretion over execution pace and timing, within the defined parameters, and it is possible that execution happens much quicker than the full length of the window’s full budget within that period.

• DAO-Share-Holding Assets: Address is the Liquidity Observation Lab multisig, Rewards Share multisig, or any other new wallet created by the members of the Growth Committee that receives Treasury assets after the Liquidity Observation Lab mutisig drawdown via Easy Track holding stETH or LDO. Sending part of those funds to Centralized Exchanges (CEX) is explicitly permitted under this mandate.

• General Execution Strategy:

  • Given that on-chain liquidity remains thin (approx. $90k depth at +/- 2% at the day of writing), a single-batch market order would result in massive slippage and is objectively inefficient. The Growth Committee may primarily utilize limit orders and Dollar Cost Averaging (DCA) to avoid market movements.

  • The DAO-Share-Holding Assets address will not hold more stETH for the purpose of this proposal than is needed for the very next batch, +5% tolerance for operational reasons. LDO acquired will be sent to the Lido DAO treasury before another batch is pulled from the treasury.

  • Growth Committee may also utilize the overall deeper off-chain liquidity on CEX such as Binance or OKX (>$100k +/- 2% depth each at the moment of writing) to execute trades or ask existing relationships with market makers to execute on Lido Ecosystem Foundation’s behalf.

  • Swap execution shall consider the Tolerable Slippage Threshold

  • Treasury assets may be used only for:

    • transfers to/from Centralized Exchanges or Market Makers

    • conversion/swaps to execute the mandate

    • necessary execution costs (e.g. swap fees / gas)

• Venues: On-chain (CoW Swap, 1inch, Uniswap) and Off-chain (Binance, Bybit, OKX, Gate, or Bitget). The Growth Committee may also engage existing market-maker partners, in Lido Ecosystem Foundation’s name, to facilitate the swap.

• Funding: The Growth Committee instructs through one of its wallets (e.g. Liquidity Observation Lab multisig on Ethereum mainnet) to pull funds via Easy Track from the Lido DAO Treasury. Each batch shall be limited to 1k stETH. After execution of each batch, and before a new batch of up to 1k stETH can be pulled, a report about execution of the previous batch needs to be published on the forum and a new Easy Track motion shall be initiated.

Roles, Governance & Reporting

Role	Party	Responsibilities	Constraints
Executor	Growth Committee	Executes trades directly through instructing the Liquidity Observation Lab multisig or Rewards Share multisig, or any DAO-Share-Holding Asset address or engages third-party market makers on behalf of the Lido Ecosystem BORG Foundation. Has discretion within parameters to prevent front-running. Sending part of those funds to Centralized Exchanges (CEX) is explicitly permitted under this mandate.	Must remain within the Budget, Execution Trigger threshold, and Tolerable Slippage Threshold at all times. Execution is only permitted through the Venues mentioned in this proposal.
Custodian	Lido Ecosystem Foundation	Holds treasury assets during execution, interfaces with CEX venues, and engages market maker relationships in a capacity on behalf of Lido DAO.	May only deploy assets for permitted uses: CEX deposits/withdrawals, swaps, and necessary execution costs. No other use of funds is authorized under this mandate.
Asset Owner	Lido DAO	Retains full beneficial ownership of all stETH deployed and all LDO acquired. Exercises ultimate governance authority over this mandate.	LDO acquired under this mandate may not be used for voting in any Snapshot or on-chain governance process while held by the Growth Committee or its execution addresses.
Oversight / Termination Authority	Lido DAO (via Snapshot / Easy Track)	May modify, pause, or terminate this mandate at any time through a Snapshot vote or object the next tranche via an Easy Track motion objection.	No minimum notice period is required, Lido DAO retains the right to recall funds at any point during the execution window.
Reporting Obligation	Growth Committee	Publishes on the Lido Research forum report after sale of each 1k stETH batch and before requesting another 1k stETH and confirmation that execution trigger conditions remain met. Publishes a full completion report within 14 days of program end (full execution of end of Execution Time).	Reporting must include: total LDO acquired to date, average execution price (LDO/ETH and LDO/USD), and remaining budget.

Potential Risks / Concerns

• Front-Run Risk

  Publicly detailing the exact timing and size of a large-scale swap exposes this operation to predatory market actors.

  • Mitigation: This proposal balances the need for transparency with the discretion necessary for viable execution. By allowing the Growth Committee a degree of operational flexibility, Lido DAO can execute the swap without signaling its exact moves to the market, ensuring the best possible price.

• Smart Contract / Counterparty risk

  The use of various on-chain and off-chain venues introduces potential technical or vendor-related vulnerabilities.

  • Mitigation: Execution will be managed by the Growth Committee, which has a proven track record of fulfilling DAO mandates. Furthermore, all venues and contracts will undergo rigorous technical due diligence by the Lido Labs BORG, Ecosystem BORG, and Alliance Foundations prior to any capital deployment. Further, the Growth Committee will negotiate terms with vendors to minimize counterparty risk where possible.

• Market Volatility

  Markets are inherently volatile and the favorable LDO:ETH ratio identified in this proposal may shift during the execution window.

  • Mitigation: The Growth Committee is bound by strict price and slippage thresholds defined in this mandate. If market conditions deteriorate beyond these tolerable levels, the execution will be paused to protect the treasury.

• CEX Funds Freezing / Blocking Risks

  Centralized exchanges may freeze, block, or delay withdrawals of treasury assets due to compliance reviews, regulatory pressure, exchange-side operational issues, or asset-specific restrictions. This could temporarily or permanently impair access to funds deposited for execution purposes.

  • Mitigation: The Growth Committee will distribute execution across multiple CEX venues rather than concentrating funds on a single exchange, reducing single-point-of-failure exposure. Batch sizing further limits the maximum amount at risk at any one time. However, it should be acknowledged that the risk of freeze cannot be fully eliminated, as it is ultimately subject to the policies and regulatory environment of each venue.

• Regulatory & Tax Compliance

  Large-scale swaps can sometimes be misconstrued as market signaling or create tax liabilities.

  • Mitigation: All transactions will be conducted at arm’s length and within tight spread tolerances (see Tolerable Slippage Threshold) to maintain market integrity. All transactions will be structured in accordance with applicable legal and regulatory requirements in relevant jurisdictions.

Options

Option 1: Trade stETH for LDO: Authorize the Growth Committee to accumulate LDO over a pre-defined period and under a given mandate.

Option 2: Do Nothing: Retain the stETH in the Treasury.

[BCV]

Supportive of this direction.

This is more aligned with the point I made in the NEST discussion: when the DAO reallocates treasury assets into LDO, the key question is relative valuation, not whether ETH happens to be above a fixed USD level.

[Kuzmich]

I like this idea for the following reasons - buying your own token when it’s cheap.

I’m sure that LDO is really undervalued right now, it makes sense for the DAO to use some of its idle stETH instead of just letting it sit there doing nothing.
And it could also help support the price and show confidence to the market about project.

This is also a good support for tokenholders until the buyback program is launched.

[Nansen]

Nansen supports the proposal.

The motivation is sound and timing right. In our view, the case is not only that LDO:ETH is trading below its historical range. More relevant is that token performance has weakened more than protocol economics over the same period, while Lido continues to generate fees and maintain a leading position in liquid staking. 

Historical ratio comparisons are useful context, but not enough on their own to establish that LDO is cheap. Governance tokens can trade below historical ranges for long periods when the market is discounting weak or uncertain value accrual to holders (all too often they trend to zero or where the market prices the value of treasury liquidation value plus a “fee-switch” option). That is why the stronger part of the argument is the direction of travel on tokenholder alignment. GOOSE-2 set “LDO alignment” as a goal, and the subsequent NEST work is explicitly designed to link protocol success more directly to LDO through repurchases funded with treasury assets. If that direction continues, it becomes more reasonable to view LDO as underpriced not only versus ETH, but also relative to Lido’s revenue capacity and broader economic position. That is a stronger basis for accumulation than historical mean reversion alone. 

On execution, we think the proposal is already well structured. Our preference would be to give the executing party discretion within clearly defined limits, then publish a post-trade TCA to the forum after each batch, or after a defined stETH threshold has been executed. That keeps the process transparent while focusing delegates on execution quality rather than only completion.

[StefanGeorge]

I am in favour of this proposal, but I want to make two remarks:

1. For the execution, the goal should be to buy as much LDO as possible with as little stETH as possible. Buy out the weak hands first. For this, I am recommending setting up a TWAP order on CoW, which can be easily done from any Safe, executing much smaller orders but more frequently, leaving no significant arb opportunities to others. CoW is using 1inch, Uniswap, etc., under the hood to settle the trades.

2. For the price to pick up long-term and investor sentiment to be positive, there should be a longer-term execution plan. E.g., use x% of revenue to buy back on a regular basis instead of a one-off situation, where investor sentiment will cool off once the buyback is done.

[Ginsing]

I’m in favour of this proposal, its a great move in right direction.
Few things to add regarding treasury and one-time buyback:

1. Lido is sitting on a $150M war chest, and it’s making us lazy. There is no urgency to grow because everyone knows we have enough cash. A massive bank account is only useful if it helps us win. Last few years showed we are funding stagnation despite several important developments that didnt influence the growth.
2. By my mind we should be more aggressive of using the war chest rather for buyback (20k steth) or growth (with direct and ambitious targets which is the best use of it)
3. It looks for a long time we dont know what to do with all this money, lets put it to use

[Hasu]

1. Treasury is $110m, not $150m. since its mostly in ETH, you might remember a different number.
2. The foundations requested $60m for 2026, of which only $27m are for core operations, $17m is expected growth spending, and $16m if a major growth opportunity arises.
3. Most? of the treasury is staked or in yield-generating stablecoins.

[lidoecosystem-ops]

@Nansen

Nansen supports the proposal.

The motivation is sound and timing right. In our view, the case is not only that LDO:ETH is trading below its historical range. More relevant is that token performance has weakened more than protocol economics over the same period, while Lido continues to generate fees and maintain a leading position in liquid staking. 

Historical ratio comparisons are useful context, but not enough on their own to establish that LDO is cheap. Governance tokens can trade below historical ranges for long periods when the market is discounting weak or uncertain value accrual to holders (all too often they trend to zero or where the market prices the value of treasury liquidation value plus a “fee-switch” option). That is why the stronger part of the argument is the direction of travel on tokenholder alignment. GOOSE-2 set “LDO alignment” as a goal, and the subsequent NEST work is explicitly designed to link protocol success more directly to LDO through repurchases funded with treasury assets. If that direction continues, it becomes more reasonable to view LDO as underpriced not only versus ETH, but also relative to Lido’s revenue capacity and broader economic position. That is a stronger basis for accumulation than historical mean reversion alone. 

On execution, we think the proposal is already well structured. Our preference would be to give the executing party discretion within clearly defined limits, then publish a post-trade TCA to the forum after each batch, or after a defined stETH threshold has been executed. That keeps the process transparent while focusing delegates on execution quality rather than only completion.

Thanks for the feedback. Agree on the framing, the proposal is designed around exactly this principle. The Growth Committee has discretion within the defined limits, i.e. the ETH:LDO ratio cap, slippage threshold, timeframe, venues, etc. all mentioned in the proposal and specified prior to each Easy Track motion. The focus is on execution quality, not just completion.

On reporting: a post-execution report covering total LDO acquired, average execution price (LDO/ETH and LDO/USD), and remaining budget will be published after each 1,000 stETH batch before the next tranche can be drawn. This aims to strike the balance between providing tokenholders with sufficient transparency to assess execution quality and object to any subsequent motion if warranted, while avoiding real-time disclosure that could expose the operation to front-running.

[lidoecosystem-ops]

@StefanGeorge

I am in favour of this proposal, but I want to make two remarks:

1. For the execution, the goal should be to buy as much LDO as possible with as little stETH as possible. Buy out the weak hands first. For this, I am recommending setting up a TWAP order on CoW, which can be easily done from any Safe, executing much smaller orders but more frequently, leaving no significant arb opportunities to others. CoW is using 1inch, Uniswap, etc., under the hood to settle the trades.

2. For the price to pick up long-term and investor sentiment to be positive, there should be a longer-term execution plan. E.g., use x% of revenue to buy back on a regular basis instead of a one-off situation, where investor sentiment will cool off once the buyback is done.

Thanks for the support.

CoW Swap TWAP is indeed an option within the execution framework and may be used where it makes sense. It works well in conditions with sufficient solver participation. The overriding objective is exactly as you frame it: maximise LDO acquired per stETH spent, within the slippage limits.

While this proposal is a one-off initiative, an automated, programmatic long-term mechanism is under R&D at the moment. The design assumptions behind it was explained in the latest tokenholder call and updates will be published in the the NEST proposal thread when available. This proposal is not a substitute for the longer-term framework NEST is designed to provide.

[cp0x]

I generally support this initiative, but I have a small financial question:

• I believe this initiative should serve several purposes:

1. Supporting the token price to signal token holders that the company is not forgetting them, and maintaining its reputation.
2. Preserving capital and using it rationally, i.e., buying your token during the dip.

But regarding the second part, there’s a question: what exactly should be spent on purchasing the token? After all, the decline in the LDO price paralleled the dip in ETH, meaning it’s worth considering using stablecoins from a treasury of the same size to purchase LDO.

[batuX]

Strong +1 on this proposal.

1. Clear valuation disconnect, hence asymmetric upside

At a ~60-70% discount to the 2-year median LDO:ETH ratio, the market is pricing in a level of structural deterioration that isn’t reflected in Lido’s fundamentals at all. The protocol continues to dominate in market share in liquid staking and generates consistent fee revenue with a proven take rate (which even grew by >20% from 5% to >6% over time).

We’re effectively looking at a scenario where:

• Cash-flow relevance (fees) is intact

• Market leadership is intact

• Systemic importance to Ethereum staking is intact, i.e. maintaining decentralisation at the staking layer

Yet the governance token is trading as if the opposite were true. It fell off from CMC100, which is where it belongs and needs to be brought back to.

I strongly support the notion of this proposal that well establishes that that gap between structural mispricing but unchanged fundamentals is the opportunity.

Deploying 10,000 stETH into LDO at these levels is not just opportunistic—it is accretive if you believe in mean reversion toward LDO:ETH parity over time—which if not the Lido DAO itself believes, who else should.

A full mean reversion to the 2-year median would be a ~3x (200% ROI) from current LDO and ETH prices.

2. Reflexivity & signaling which breaks the bearish overhang

Crypto markets are reflexive.

A DAO allocating 10,000 stETH to acquire its own token at multi-year relative and absolute lows sends a very strong signal:

• Internal conviction is high

• Treasury is willing to underwrite that conviction

• LDO is not just governance. It’s a strategic reserve asset

This can catalyze a re-pricing loop:

• DAO buys → market interprets signal → external demand follows → LDO:ETH ratio compresses upward

In other words, this can be in itself, or a serious part of an ongoing effort, for a narrative reset that can help re-anchor expectations closer to fundamentals.

Doing this on the back of the upcoming LDO buyback program which is going to go live in q2 / q3 makes this even better timing.

3. Execution

The proposed 1,000 stETH tranche execution via Easy Track is the right direction:

• Minimizes slippage and adverse price impact

• Preserves flexibility if market conditions change

• Maintains ongoing DAO oversight rather than a one-shot deployment

[lidoecosystem-ops]

Thanks for the feedback and support.

The LDO price decline did not parallel the ETH dip. As shown in the LDO:ETH ratio chart at the top of the post, LDO has fallen roughly 63% against ETH over the past two years. If LDO had simply tracked ETH downward in lockstep, the LDO:ETH ratio would have remained flat. The dislocation between the two is what creates the opportunity: denominated in ETH, LDO seems historically undervalued.

On the question of using stablecoins instead of stETH:

1. The DAO’s stablecoin reserves serve a specific and essential function: funding ongoing operations and approved growth spending under the 2026 EGG budget. These assets were converted into stablecoins to meet the spending approved under the 2026 EGG budget. We could convert additional stETH into stablecoins and then use those stablecoins to acquire LDO. However, that would mean selling stETH at a relatively low price if done now. If done on a per-acquisition basis, it would involve an additional transaction with no clear benefit.

2. The trade is denominated in the asset pair where the dislocation actually exists: LDO vs. ETH. When you measure in stablecoin terms, you’re introducing a second variable (ETH/USD) that obscures the relative mispricing. Using stETH as the funding source keeps the trade aligned with the thesis.

[governance-data-bot]

Snapshot vote started

We’re starting the Authorize LDO Accumulation Program for up to 10,000 stETH Snapshot, active till Mon, 13 Apr 2026 16:00:00 GMT. Please don’t forget to cast your vote!

[Leuts]

I’m in favour of the proposal.

LDO:ETH is trading below the historical range and below the DAO and protocols continued excellence in its vertical.

Although dual governance in place, it’s still wise to keep an eye on price and distribution from a governance perspective as well.

Looking forward to more programatic forms of buy-backs, such as NEST, so less trust and discretion is required.

[Leuts]

Dude, stop going around every governance forum in the industry using AI. It’s incredibly tiring.

[katernoir]

10,000 stETH is a significant deployment - at current prices that’s close to 10% of LDO’s circulating supply. How was that number determined, and what’s the expected time horizon to finish this deployment? The treasury already is >25% LDO, so this is a bigger chunk of it than it might seem. In my opinion this only makes sense if there are strong arguments to why LDO is undervalued right now. Being beyond the 2-year median is not enough for me here as any declining asset looks cheap relative to its own history. What actually drives LDO back relative to ETH from here? In order to vote yes on the proposal, I would want to hear stronger points than this.

What outcome metrics will be considered when evaluating this buyback process? Are we targeting a specific LDO/ETH price ratio? Do we stop if it’s reached? This needs to be defined upfront before any capital is deployed.

There’s also a question of who benefits from this proposal. NEST creates a structural link between protocol performance and LDO value. This one-off doesn’t - it potentially creates a bid that existing holders can sell into before the market corrects its view on LDO. I don’t see that much urgency to correct that view of LDO before NEST takes over. But maybe I’m missing some benefits the DAO itself has right now from LDO having higher market value?

[bartencj]

Because LDO has more ETH/stETH reserves than it requires for operating needs in the near-to-medium term, seems to me the relevant question is what use of those reserves will provide LDO holders with the highest (long term) expected return:

Option A: continue holding excess reserves as stETH:

Assuming staking yields hold constant, this provides LDO an ~2.5% expected rate of return on those excess reserve assets.

Option B: buyback LDO:

By my calculations, LDO’s market cap net of reserve assets (its “enterprise value”), sits at ~3X Lido’s annual protocol revenue. If Lido had no operating costs, that would imply a ~33% rate of return.

Of course Lido does have operating costs, and currently these are approximately equal to to Lido’s annual protocol revenue, meaning LDO is currently capturing no net return at current ETH prices. However, roughly half of this operating budget is “discretionary” in the sense that it is dedicated towards growth initiatives. This portion of the budget essentially amounts to capital investment in the protocol, not true operating expense. In theory, a decision of the DAO to approve the discretionary portion of the budget reflects its believe that doing so achieves a higher ROI than holding that balance as stETH or buying back LDO tokens.

If you assume that half of the Lido budget is true operating cost, that implies LDO achieves a ~50% operating margin and thus accrues a ~16.5% (50% * 33%) rate of economic return, which is substantially higher than the 2.5% rate of return achieved by holding stETH.

Another factor to take into account is that LDO has significant “operating leverage” with respect to the price of ETH in the sense that Lido’s operating costs are basically fixed, whereas the protocol’s revenue scales linearly with the price of ETH. If ETH doubled in price, Lido’s “net profit” (protocol revenue net of core operating costs) would roughly triple. A 3X in ETH price would roughly 5X Lido’s “net profit”. What this means is that LDO has more upside relative to stETH with an increasing ETH price, but also more downside relative to stETH with a falling ETH price.

Conclusion:

If someone believes (as I suspect most LDO holders do) the following:

• Lido can sustain roughly its current TVL on an ETH denominated basis
• ETH staking yields won’t plummet well below current levels
• ETH currently is fairly valued or undervalued

Then I believe an extremely strong case can be made that swapping stETH for LDO at current LDO prices will produce significantly higher expected returns for LDO holders vs sitting in stETH..

[katernoir]

@bartencj

However, roughly half of this operating budget is “discretionary” in the sense that it is dedicated towards growth initiatives. This portion of the budget essentially amounts to capital investment in the protocol, not true operating expense.

Thanks! Where do you get the numbers from that roughly half of the operating budget is dedicated towards growth initiatives?

Looking at GOOSE-2025 & EGGs-2025 Final Report growth & liquidity is roughly 10% of total operating cost, not 50%. “Operating expenses are primarily driven by Compensation and Service Fees.” One could maybe argue that the biggest block of costs (R&D) is discretionary, but I don’t think this holds true when without it, Lido would most likely not be able to maintain market share.

[bartencj]

@katernoir

GOOSE-2025 & EGGs-2025 Final Report

Hi there!

My premise that roughly half of the operating budget is dedicated towards growth initiatives is based was this breakdown on use of funds provided in this approved 2026 Ecosystem Grant request.

https://_research.lido.fi/t/2026-ecosystem-grant-grequest-egg-executing-goose-3/10951

(remove underscore; I don’t seem to have permission to include links in my post)

For purposes of my analysis, I have treated the entire “growth” budget as “discretionary” – in the sense that the purpose for this budget is growth as opposed to maintenance of the core protocol.

Note that I am not using the definition of “discretionary” used in the grant proposal. As I understand, “discretionary” in the context of the proposal means that Lido Labs retains discretion over whether to actually spend that portion of funds for 2026 (whereas token holders can assume Lid Labs will definitely spend the “baseline” growth budget).

I’ll acknowledge that I have implicitly assumed in my analysis that Lido could roughly maintain its market share without any growth budget. That may not be a reasonable assumption and it’s not one I’m prepared to defend; I welcome alternative perspectives on that question.

Worth noting: even if you assume that all “baseline” funds in this proposal (27M Core + 17M Growth), are required to “maintain” Lido’s competitive position and market share (and thus that LDO has more like a 20% operating margin when excluding discretionary items), you’d still achieve at the conclusion that LDO is yielding ~6.5% on an ETH denominated basis, which is still much higher than stETH! And moreover if you make that assumption, that also implies that LDO has much greater ETH operating leverage / convexity.

[lidoecosystem-ops]

@katernoir

10,000 stETH is a significant deployment - at current prices that’s close to 10% of LDO’s circulating supply. How was that number determined, and what’s the expected time horizon to finish this deployment? The treasury already is >25% LDO, so this is a bigger chunk of it than it might seem. In my opinion this only makes sense if there are strong arguments to why LDO is undervalued right now. Being beyond the 2-year median is not enough for me here as any declining asset looks cheap relative to its own history. What actually drives LDO back relative to ETH from here? In order to vote yes on the proposal, I would want to hear stronger points than this.

What outcome metrics will be considered when evaluating this buyback process? Are we targeting a specific LDO/ETH price ratio? Do we stop if it’s reached? This needs to be defined upfront before any capital is deployed.

There’s also a question of who benefits from this proposal. NEST creates a structural link between protocol performance and LDO value. This one-off doesn’t - it potentially creates a bid that existing holders can sell into before the market corrects its view on LDO. I don’t see that much urgency to correct that view of LDO before NEST takes over. But maybe I’m missing some benefits the DAO itself has right now from LDO having higher market value?

These are good questions to ask, addressing each in turn.

1. How was the budget size determined?

The 10,000 stETH figure was chosen to be material enough to reflect genuine conviction rather than a cosmetic gesture, while remaining a measured fraction of the overall treasury. Importantly, the proposal does not commit to deploying all 10,000 stETH, it sets a ceiling. The structure never commits to the full amount. Execution proceeds in 1,000 stETH increments, each requiring a new Easy Track motion that tokenholders can object to with just 5 million LDO. The programme is therefore self-regulating: if market conditions shift or tokenholders judge subsequent batches unwarranted, it can be stopped at any point.

2. What is the expected time horizon for deployment?

Deliberately omitting a fixed global timeline is a feature of the design. Publishing a specific end-date for the entire program in advance would provide a roadmap for front-runners, particularly given thin liquidity.

The execution window for each batch will be specified in the forum post published prior to each Easy Track drawdown. It will be calibrated to strike a balance between execution speed, transparency, and quality. The Growth Committee intends to execute as efficiently as conditions permit. The window represents an outer bound, not a planned timeline.

3. Why does LDO appear undervalued beyond simply being below its historic 2-year median?

The historic 2-year median alone is not the stand-alone argument. The more relevant observation is the divergence between price and fundamentals over the same period.

During the period in which the LDO:ETH ratio fell approximately 50%, net protocol rewards declined by only ~20%. Meanwhile, the protocol’s cost base improved 13% year-over-year (2025 vs. 2024), and the take rate increased from 5% to 6.11% meaning the DAO’s share of protocol economics actually improved even as the token re-rated sharply lower. On a fee-capture basis, the protocol is generating more per unit of ETH staked than it was when LDO traded at multiples of its current ratio.

Framed in revenue terms: the valuation protocol-revenue multiple has compressed significantly relative to where it stood for most of the prior two years, without a proportional deterioration in underlying economics.

Based on the EGG 2026 budget and price assumptions an operating margin above the staking yield is expected, as most the discretionary budget as well as part of the Growth Baseline budget are meant as capital investment. What makes the economics interesting is the operating leverage. Costs are overwhelmingly fixed in USD terms. Revenue, however, scales linearly with ETH price. Each ETH increase above the breakeven point adds to annual operating income with no corresponding cost increase. This means LDO has a structurally different risk-return profile than stETH. Holding stETH earns approximately 2.5% per year, symmetric in all ETH price scenarios.

LDO’s implied economics are convex: the protocol underperforms stETH in flat or declining markets and may outperform in rising ones. Whether that convexity is attractive is a judgment call that depends on one’s view of ETH’s current valuation, Lido’s fee projection, and whether emerging mechanisms like NEST will translate tangible value that is appreciated by tokenholders and the market.

4. What outcome metrics will be used to evaluate the programme? Is there a price ratio target?

The LDO/ETH ratio cap published prior to each batch drawdown is the primary outcome metric. It sets the maximum price at which the DAO is willing to acquire LDO for that batch, and tokenholders can assess whether they agree. There is intentionally no programme-wide price target: setting one publicly in advance would itself create an adverse dynamic. The per-batch reporting provides the data needed to evaluate execution quality on an ongoing basis.

5. Why execute a one-off buyback before NEST is active?

NEST is expected to become active during Q2 2026, meaning the structural mechanism is close. But NEST is designed to activate based on protocol performance metrics and ETH price conditions, it is not specifically calibrated to act on the kind of discrete, historically wide LDO:ETH dislocation that exists today. Waiting for NEST may mean waiting past the window. This is ultimately a capital allocation judgement, and it is presented as such. The DAO retains the ability to stop at any batch if it concludes the trade is no longer compelling.