In a recent proposal, Lido introduced an automatic buyout mechanism. Use LDO and wstETH liquidity to form a Uniswap v2 style liquidity pool. Managed by Aragon Agent. If approved, the plan could begin as early as the first quarter of 2026.
The goal is simple but powerful. Remove LDO tokens from circulation through automatic buybacks while increasing on-chain liquidity. This makes LDO more useful across decentralized finance (DeFi) platforms, giving token holders more trust and long-term value.
How the buyback mechanism works
In traditional finance, companies buy back their own stock to reduce supply and increase value. Lido’s proposal brings similar ideas on-chain. Instead of buying shares, the DAO uses the proceeds from staking rewards to buy its own LDO tokens. The token will then be paired with Wrapped Stake ETH (wstETH) in a liquidity pool, increasing trading depth while phasing out LDOs from the public market.
This system only works under certain conditions. For example, if ETH trades above $3,000 and Lido’s annual revenue exceeds $40 million, a buyback will occur. The program has a $10 million annual limit to prevent overspending, and up to 50% of staking inflows above that threshold will be used.
A proposal to implement an automated LDO buyback mechanism is currently being published on the Lido DAO forum.
We welcome comments on mechanisms, proposed parameters, etc.
— Lido (@LidoFinance) November 11, 2025
This setup is anti-cyclical, meaning it reacts to market performance. As ETH price and earnings rise, buybacks will increase, supporting the value of the token. In a bear market, the system slows down or stops, preserving DAO funds. This approach mirrors the financial strategies found in protocols like MakerDAO’s Smart Burn Engine, which also automates buybacks based on market conditions.
Learn more about Lido
Lido DAO has announced stRATEGY, a new product that makes earning DeFi rewards easier and more automated. Built on Mellow Protocol’s Core Vaults, stRATEGY allows users to make a one-time deposit of ETH, WETH, or wstETH and automatically distribute those funds to trusted platforms such as Aave, Ethena, and Uniswap. The system continuously adjusts the balance to maximize rewards and simplifies previously complex processes.
Introduction to strategy
Carefully selected DeFi rewards centered on stETH
Aave, Ethena, Uniswap, etc.
— Lido (@LidoFinance) November 6, 2025
In return, users receive strETH, a token that allows them to earn both DeFi yield and Mellow points as an additional incentive. Users have complete flexibility as they can convert strETH back to wstETH at any time. With stRATEGY, Lido DAO aims to make DeFi participation more accessible while focusing on reliable, battle-tested integrations that optimize returns.
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