Since we had this discussion less than a year ago, I’ll briefly reiterate why I see this as a bad idea. It results from several flawed assumptions about the economic health of the Lido protocol.
- Lido treasury isn’t ~$500m but actually $130m. LDO should be fully discounted
- Lido’s annual cost isn’t $16m but was $100m in 2023 and projected to be $50-60m in 2024.
- Lido’s surplus is 0, so there isn’t anything to distribute yet
-
If you tapped into revenue (not surplus) like suggested, you’d have to
- Drain the treasury, which isn’t big to begin with. If ETH goes down 50% (to levels last seen 10/2023), both treasury and revenue would halve. This would put us at $65m treasury and ~$30m revenue, while costs would stay the same. That’s less than 2 years of runway.
- Increase revenue. The DAO is working on that, but it takes time.
- Reduce cost. The only way to do this is to reduce the budget allocated to implementing the DAO’s agreed-on strategic priorities. Given the competitiveness of the staking market, I would see that as a terrible mistake.
- Issue more LDO to make up the shortfall. Self-defeating for obvious reasons
-
So instead, I propose the following steps
- Let’s get Lido to a place where it generates a surplus
- and can defend that surplus from erosive forces of competition with a solid market position
- Closer to that point, establish a good mechanism to share surplus with LDO holders. I’m highlighting the “good” because the current proposal of requiring NOs to post a bond would both (i) undermine Lido’s differentiation to other protocols and (ii) further lower its net income by increasing the cost of revenue.
All charts taken from https://dune.com/steakhouse/lido-safu