GM, Aleks here.

For the second time in five months, the Lido DAO is debating a buyback proposal. Unlike the previous proposal — designed to act programmatically and sustainably — the latest appears to be a one-time quick fix addressing brutal price action and frustrated investors.

For all the criticism directed at Lido over the past several years, it remains the second-largest protocol on Ethereum, with nearly $19 billion in user deposits as of Tuesday morning. It generated $40 million in revenue last year, half of which goes to the Lido DAO, a cooperative run by tokenholders.

And yet its token is in the dumps.

LDO has touched $0.27 a couple of times this month, marking an all-time low. It is remarkably poor performance for an asset tied to such a successful business.

I’ve written about this before — nobody wants governance tokens that give them a say in protocol management. The average investor wants no part in running a business. Even the small coterie of whales that functionally run most major DAOs can’t accumulate enough tokens to regularly reach quorum.

Like other DAOs, Lido has turned to the most obvious solution to placate frustrated investors: buying back its tokens.

In November, Steakhouse Financial, a firm that integrated with Lido DAO to form the Lido Finance Operations Team, put forward a programme that would only trigger under certain conditions, to wit: Ether trading above $3,000 and the DAO bringing in more than $40 million in annualised revenue.

Once those conditions are met, the protocol would use 50% of treasury inflows from staking over the initial $40 million to buy LDO tokens.

But that proposal has foundered. In the Lido forum, employees have assured DAO members a more detailed version of the proposal is in the works.

Members’ patience, however, is running out as LDO hits all-time lows.

“Until we fix the tokenomics we should accept that LDO tokens have no real economic value because they are merely votes, not dividend-paying shares,” one member wrote in the forum.

“They could be called worthless papers, with profits coming from later buyers paying earlier buyers.”

Sensing unrest, perhaps, the Lido Ecosystem Foundation on Friday proposed using up to 10,000 staked Ether tokens, worth about $20 million on Tuesday, to purchase LDO. It cited the token’s rock-bottom price as the motivation.

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

The proposal was not an “addition, specification or replacement” to November’s automated buyback programme, the Foundation added. “The current proposal is an one-off initiative to utilize market opportunities.”

Lido DAO members have voiced their support and LDO has rallied some 18%, to $0.32, since Friday.

“I’m sure that LDO is really undervalued right now, it makes sense for the DAO to use some of its idle [staked Ether] instead of just letting it sit there doing nothing,” one member wrote.

Now, the question is: is LDO truly undervalued, or is the market just waking up to the reality that governance tokens — and, perhaps, the DAO model writ large — aren’t all that interesting?

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