Lido DAO governance contributors are debating how to constrain the protocol’s automated LDO token buyback mechanism ahead of the 2027 grant request, with the core question centering on whether to tie spending capacity to the annual budget or periodically reset the buyback engine’s negative spending counter.
Kuzmich, a governance contributor, began modeling simulations on October 1 and proposed on October 7 that the NEST framework link automated buyback thresholds to the 2027 grant budget. The proposal opened discussion on two alternatives: anchoring spending limits to budget planning or resetting the counter periodically to allow fresh spending cycles.
Jenya_K, another governance contributor, responded on October 9 in support of considering a budget link in the 2027 grant request. “The amount must come from bottom-up planning,” Jenya_K stated, emphasizing that spending constraints should flow from deliberate budget construction rather than mechanical formulas.
The NEST mechanism operates by comparing measured staking revenue against a daily baseline of $109,589. Half the difference between actual and baseline revenue feeds a running spending counter. When revenue falls below baseline, the counter decreases; when revenue exceeds baseline, the counter must repair any shortfall before purchases resume. The system enforces a $50,000 daily spending cap and a $10 million cap over fixed 365-day windows, with a $1,000 allocation minimum per purchase.
On October 13, the allocator held 41.12 stETH with no outgoing transfers since an August 28 top-up of 41 stETH. The NEST counter stood at a negative $564,230.96, meaning no purchases were funded on that date.
Kuzmich’s October 11 follow-up corrected the treatment of staking rebates and tested profitability under different scenarios. The model ran 1,000 ETH price paths over 12 months starting October 1 at an $2,679.84 ETH price, assuming 61% annual volatility. Under the current rule, mean purchases reached $2.3 million; after correcting expense assumptions, the model showed a mean of $8 million in annual modeled profit with a 22.2% fraction of paths ending in loss at a $30 million expense threshold.
A sensitivity analysis from October 13 produced a median of $2.1 million in purchases. Comparing carry-forward logic against annual resets showed average spending of $2.6 million with carry-forward versus $2.8 million with annual resets, an 8% gain from resets. Carry-forward produced loss outcomes in 19.5% of periods; annual resets produced losses in 30.0% of periods. Purchases represented 3.5% of dollars under carry-forward and 4.4% under annual resets.
Lido’s first-half unaudited accounts showed $15.7 million in net staking revenue plus $230,000 Earn income, totaling $15.9 million net DAO revenue. Foundation expenses of $14.3 million left a $1.6 million operating surplus, but a $6 million Kelp-related one-off loss produced a $4.4 million total loss. The 2026 grant request presented a $43.8 million baseline; first-half reporting referenced $41 million expenses with projections of $37.7 million for the full year.
On the accounting treatment of rebates, Jenya_K clarified: “CSM rebates are already included in financial reporting, so adding them again to reported net revenue would double-count them.” This distinction shapes how revenue figures flow into the NEST counter and informs the baseline revenue assumptions underpinning the buyback mechanism.
