Lido DAO Eyes Automated LDO Buyback Mechanism for 2026 Launch

Lido DAO is preparing a major upgrade to its tokenomics. The community is currently reviewing a new proposal that would introduce an automated LDO buyback system, designed to reduce the token’s circulating supply while strengthening on-chain liquidity.

If approved, the plan could roll out in Q1 2026, marking one of the most significant structural changes to Lido’s governance and treasury management since inception.

The proposal, now live on the Lido DAO Forum, was introduced by Steakhouse Finance. It outlines an automated buyback mechanism that uses staking revenue to purchase and remove $LDO from circulation. At the same time, it deepens liquidity through a Uniswap v2-style liquidity pool pairing LDO with wstETH, Lido’s wrapped staked ETH token.

This approach mirrors MakerDAO’s Smart Burn Engine, blending automated execution with anti-cyclical market logic. Instead of manually timing buybacks, the system would function like a “set-and-forget” engine, programmed to execute under specific market conditions.

A proposal to implement an automated LDO buyback mechanism is now live on the Lido DAO Forum.

Opinions regarding mechanism, proposed parameters and more are welcome.https://t.co/Hve7cS405J

— Lido (@LidoFinance) November 11, 2025

The buyback model centers around an Aragon Agent, which will hold the DAO’s LDO/wstETH LP position. This structure ensures transparent, decentralized control over the liquidity and buyback operations.

Here’s how the mechanism is expected to function:

Trigger Conditions:

•    ETH price must be above $3,000.
•    Lido’s annual USD revenue must exceed $40 million.

Allocation:

•    50% of all treasury inflows above the $40M threshold will be allocated to LDO buybacks.

Limits:

•    Buybacks are capped at $10 million per year.
•    Price impact is limited to 2% or less to avoid market distortion.

Once these conditions are met, the system automatically purchases $LDO from the market, adds it to the LDO/wstETH liquidity pool, and burns or removes the acquired tokens, effectively shrinking the circulating supply while earning small trading fees from the LP position.

One of the most compelling aspects of this proposal is its anti-cyclical logic. Instead of buying back tokens during down markets, when liquidity is thin and price volatility high, the mechanism activates more aggressively during bull markets.

When ETH trades above $3,000 and Lido’s staking revenue increases, the protocol channels excess income into buybacks. In weaker conditions, activity slows or stops entirely, allowing the treasury to conserve resources.

This approach keeps the mechanism self-sustaining, avoiding unnecessary sell pressure in bear markets while taking advantage of strength during bullish cycles.

If implemented, the new system could reshape the economics of $LDO, Lido’s native governance token. By regularly buying back and removing tokens from circulation, Lido effectively increases scarcity while providing deeper, more resilient on-chain liquidity.

The continuous liquidity provisioning through the Uniswap v2-style pool also serves a dual purpose, it not only supports stable trading conditions but also generates fee income for the DAO. Over time, this could create a virtuous cycle of revenue generation, token support, and community-driven growth.

True to its decentralized ethos, the Lido DAO is inviting open discussion on the proposal before proceeding to a formal vote. The forum thread is currently gathering feedback on the mechanism’s parameters, such as the $3,000 ETH threshold, the $10 million annual cap, and the treasury inflow limits.

Once the debate period ends, the community will move toward a Snapshot vote. If the proposal passes, execution is targeted for Q1 2026.

This timeline gives developers and contributors enough room to test the system, finalize smart contract audits, and ensure integration with Lido’s broader staking infrastructure.

The proposed system aims to deliver several long-term benefits:

•  Reduced Circulating Supply: Automated buybacks gradually remove LDO from the open market.
•  Deeper Liquidity: The LDO/wstETH pool boosts available liquidity for traders and governance participants.
•  Revenue Utility: Redirecting staking income into buybacks aligns DAO revenue with tokenholder value.
•  Transparency and Automation: Using Aragon Agent ensures decentralized ownership and verifiable on-chain operations.
•  Market Stability: The capped, rule-based execution prevents price manipulation or excessive volatility.

Overall, the initiative seeks to make Lido’s tokenomics more dynamic, transparent, and market-aligned, establishing a self-balancing system that grows stronger alongside Ethereum’s ecosystem.

The proposal arrives at a time when Lido continues to dominate the liquid staking sector, holding the largest share of staked ETH on the market. As staking revenues rise alongside Ethereum’s long-term growth, automated treasury mechanisms like this could help DAOs manage capital more efficiently, and make governance tokens more valuable to holders.

If Lido’s community approves the plan, it could serve as a model for other DAOs looking to combine on-chain automation with real yield and liquidity incentives.

For now, the community discussion remains open, with a clear message: Lido DAO wants to evolve its treasury operations for the next phase of decentralized finance.

At the time of writing, Lido DAO ($LDO) trades around $1.89, down 1.2% in the last 24 hours, with a market capitalization of $1.69 billion, according to data from CoinMarketCap.

If the buyback proposal passes, that figure could see renewed strength as the DAO introduces a long-term, revenue-backed system to support its native token.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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