In a recent proposal, Lido introduced an automated redemption mechanism. It would use LDO and wstETH liquidity to form a Uniswap v2 style liquidity pool. It will be managed by Agent Aragon. If approved, the plan could launch as early as the first quarter of 2026.
The goal is simple but powerful: remove LDO tokens from circulation through automated redemptions while improving on-chain liquidity. This would make LDO more useful on decentralized finance (DeFi) platforms, giving token holders more trust and long-term value.
How does the buyback mechanism work?
In traditional finance, companies buy back their own shares to reduce supply and increase value. The Lido proposal brings a similar idea to chain. Instead of purchasing shares, the DAO would purchase its own LDO tokens using revenue generated from staking rewards. The tokens would then be paired with staked ETH (wstETH) in a liquidity pool, improving trading depth while phasing out LDO from the open market.
The system is only activated under certain conditions. For example, buybacks would take place when ETH is trading above $3,000 and Lido’s annual turnover exceeds $40 million. The program would use up to 50% of staking entries above that threshold, with a limit of $10 million per year to prevent overspending.
A proposal to implement an automated LDO redemption mechanism is now live on the Lido DAO forum.
We welcome feedback regarding the mechanism, proposed settings, and more.
– Lido (@LidoFinance) November 11, 2025
This pattern is countercyclical, meaning it responds to market performance. When ETH prices and revenues rise, redemptions increase, supporting token value. In bear markets, the system slows down or pauses, thereby preserving DAO funds. This approach mirrors treasury strategies seen in protocols such as MakerDAO’s Smart Burn Engine, which also automates redemptions based on market conditions.
Find out more about the Lido
Lido DAO has unveiled stRATEGY, a new product that makes earning DeFi rewards easier and more automated. Built on Mellow Protocol’s Core Vaults, stRATEGY allows users to deposit ETH, WETH or wstETH once and automatically distributes these funds to trusted platforms like Aave, Ethena and Uniswap. The system continually rebalances itself to maximize rewards, simplifying what was once a complex process.
Strategy presentation
Curated DeFi rewards focused on stETH
Aave, Ethena, Uniswap and more
– Lido (@LidoFinance) November 6, 2025
In exchange, users receive strETH, a token that accumulates both DeFi yields and Mellow Points for additional incentives. At any time, strETH can be converted back to wstETH, providing users with complete flexibility. With stRATEGY, Lido DAO aims to make DeFi participation more accessible while focusing on reliable, proven integrations that maximize returns.
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