Lido DAO, the decentralized organization that manages Ethereum’s main liquid staking protocol, is considering a $1 million buyback of its LDO tokens with the aim of removing them from the market and stimulating demand.
The initiative is born Today, March 30th, LDO price is about $0.32 Background of the sharp declineThis is 95% from the all-time high (ATH) of $7.30 reached in August 2021.
The governance proposal, submitted on March 27, proposes to use up to 10,000 stETH ($20 million at current prices) from the Lido DAO treasury, a synthetic token representing Ether (ETH) staked within the protocol, to purchase LDO on the market.
The acquired tokens will be returned to the Ministry of Finance. It seeks to reduce circulating supply (8%) and create upward pressure on prices.
To understand the scope of this measure, it is important to understand Lido’s role within the Ethereum ecosystem. This protocol allows users to participate in staking, as explained in Criptopedia, the education section of CriptoNoticias. This means you can block ETH, validate transactions, and work with network security without losing liquidity. In return, you receive stETH that can be used in various financial instruments within the digital ecosystem.
The central argument of this proposal is that LDO’s current price does not reflect the fundamentals of the protocol. According to the promoter: There is a “significant discrepancy” between the token price and Lido’s actual performance.
In their proposal, they point out that the relationship between LDO and ETH shows a significant discount compared to recent historical averages, despite no comparable deterioration in the protocol’s operational metrics.
The graphs included in the proposal allow you to clearly visualize this disconnect. This shows how the relationship between LDO and ETH prices has steadily declined over the past two years. The curve shows a noticeable decline to current levels near 0.00016, well below the historical range of price action (which hovered between 0.0004 and 0.0005).
This is the central point of the proposal. Although LDO fell sharply against ETH, the Lido indicator did not deteriorate to the same extent. The net reward for this protocol has decreased by approximately 20%. However, operating costs improved and the commission rate held by Lido increased from 5% to 6.11%.. For boosters, this suggests that the token’s price has fallen more than the protocol’s fundamentals warrant.
The execution of share buybacks is planned in stages through split acquisitions. It aims to avoid sudden market impacts and minimize price slippage.. Depending on the liquidity situation, operations can be performed on both decentralized platforms (DEXs) and centralized exchanges.
Please note that this initiative is presented as follows: Capital allocation decisions to capture value and enhance protocol development.
But at the same time, it also raises the following questions: At what point is a buyback with Treasury funds considered a direct intervention in the price of a token?
The proposal takes into account the fundamental debate of whether the market is undervaluing LDOs or, conversely, whether the current price reflects the limits that governance tokens typically require to capture value. This is because governance tokens often do not have direct access to protocol revenues, making them less useful for voting functions, among other things.
Currently, the proposal is still under discussion and refinement on the Lido Research Forum (Lido Research) and has not yet entered the formal voting stage, according to the Lido Voting Portal (Snapshot).
If successful, this effort would be a concrete step towards more active management of tokens by the protocol.at a time when LDO is still far from its historic highs.
(Tag translation) Altcoin
