Authorize a Contingent LDO CEX Liquidity Market-Making Mandate

Proposals
1

TL;DR

  • This proposal asks Lido DAO to authorize a contingent LDO centralized-exchange liquidity mandate to reduce the risk of LDO pair degradation or delistings on centralized exchanges. Given observed significant decreases in LDO trading volume, organic market making activity has become less profitable for market makers and the Growth Committee would like to proactively prepare for a scenario where their withdrawal liquidity provision on LDO pairs risks the delisting of such pairs from the respective trading venues.
  • The maximum authorization, funded from the Lido DAO Treasury, is up to $1.5m (~4,000,000 LDO at $0.37/LDO) as a recallable LDO facility for market-making inventory and up to 480,000 USDC in expenses for fixed retainers and directly related costs over up to 12 months from the activation date. The authorization itself has a 2-year shelf life if not activated.
  • No deployment would occur unless the Growth Committee determines that LDO liquidity on centralized exchanges is insufficient, or likely to become insufficient, such that a market-making mandate is necessary or prudent. Until then, necessary funds should remain unencumbered and readily available in the Lido DAO Treasury for a potential deployment. While this authorization is to be ongoing, a snapshot proposal may end this authorization at any time, subject to any remaining terms on concluded external agreements; any changes to scope/budget for these activities require separate authorization.
  • Disbursement from the DAO Treasury to the Liquidity Observation Lab should occur through Easy Track transfer motions where available. If the existing Easy Track setup does not support the required token, limit, or recipient configuration, this proposal authorizes the deployment and DAO registration of new Easy Track instance(s) needed to route the approved LDO and USDC caps to the Liquidity Observation Lab multisig.
  • If activated, the intended structure is: Lido DAO makes a recallable LDO facility available to the Lido Ecosystem Foundation; the Lido Ecosystem Foundation makes a back-to-back recallable LDO facility available to the selected market maker; and the LDO is operationally disbursed to the Liquidity Observation Lab and onward from there under the approved mandate structure. Where possible, contributors will seek to keep market-making assets in a centralized exchange account belonging to the Lido Ecosystem Foundation, with the market maker granted limited trading permissions and no withdrawal rights. The mandate is intended to support orderly two-sided liquidity and listing continuity, not to support, target, or influence the market price of LDO.
  • Once activated, quarterly updates covering USDC spend, outstanding LDO, and high-level performance indicators will be shared on the forum together with a completion report, published within two weeks after the program ends.

Proposal Overview

The DAO is asked to approve:

  1. a contingent LDO CEX liquidity mandate for up to 12 months from activation;
  2. a recallable LDO facility of up to $1.5m (withdrawable in LDO equivalent) from the Lido DAO Treasury (in addition to the approved EGG budget);
  3. LDO $1.5m equivalent based on the Coingecko LDO closing price in USD on the day before EasyTrack motion initiatio;
  4. a budget of up to $480k in USDC from the Lido DAO Treasury (in addition to the approved EGG budget);
  5. authority for the Growth Committee to decide whether the mandate should be activated - and to negotiate favorable conditions with market makers - based on LDO CEX liquidity conditions;
  6. authority for the Lido Growth Committee to coordinate implementation and for the Liquidity Observation Lab to support execution and onward operational disbursement;
  7. disbursement from the DAO treasury to Liquidity Observation Lab through Easy Track transfer motions; and
  8. deployment and DAO registration of new Easy Track instance(s), if needed, to support transfers of the approved LDO and USDC amounts to the Liquidity Observation Lab multisig at 0x87D93d9B2C672bf9c9642d853a8682546a5012B5 on Ethereum mainnet.

The authorization expires two years from the date of the DAO vote authorization if not activated earlier.

This proposal does not approve any specific market maker, exchange, call option, warrant, token purchase right, price-support activity, or use of borrowed LDO for governance voting.

Motivation

Maintaining adequate LDO liquidity on major centralized exchanges can help reduce listing-continuity risk and preserve orderly secondary-market access for tokenholders. The Lido Ecosystem Foundation does not currently engage any market makers on LDO pairs. If liquidity deteriorates materially, contributors may need to respond quickly to exchange concerns or market-quality issues. Exchanges may give little advance notice of a potential delisting due to insufficient liquidity. A pre-approved, capped, contingent mandate avoids rushing governance during a potential venue review or delisting process.

This is a preventive risk-management measure. It should not be read as a commitment to activate a market-making program immediately upon approval of the proposal but rather an option to activate at any time.

Market Sounding and Budget Calibration

Preliminary market soundings indicate that comprehensive LDO CEX market-making coverage generally requires token inventory, a fixed retainer, option-style compensation, or some combination of these. This proposal avoids option-based compensation and favors a fixed-retainer structure because it is more predictable and easier for tokenholders to evaluate.

The requested cap of 480,000 USDC plus $1.5 million in LDO equivalent, valued when the relevant Easy Track motion is initiated, is neither based on nor intended to disclose any specific quote. It is a conservative authorization envelope informed by the overall range of market feedback received to date.

The Lido Ecosystem Foundation has received more favorable quotes below this authorization cap, and the final mandate may be smaller, cheaper, narrower in scope, or not activated at all. The proposed cap intentionally includes a buffer to avoid execution risk if final terms, venue coverage, onboarding requirements, custody setup, fee tiers, or timing differ from current expectations. The objective is to avoid returning to governance solely because an otherwise acceptable mandate is marginally above a tighter approval amount.

Activation Criteria

The mandate may be activated only if the Lido Growth Committee determines that LDO CEX liquidity is insufficient, or likely to become insufficient. They may consider, among other factors:

  • exchange communications about liquidity, listing quality, or delisting risk;
  • deterioration in spreads, order-book depth, or market-maker uptime;
  • upcoming listing reviews or pair-maintenance processes; and
  • cost, counterparty risk, legal, regulatory, and operational feasibility.

If that determination is not made, the mandate remains inactive.

Easy Track Disbursement Mechanics

Disbursements of both the USDC retainer/cost budget and the LDO facility should come from the Lido DAO Treasury and be routed to the Liquidity Observation Lab through Easy Track transfer motions rather than a one-off treasury transfer, where the relevant Easy Track setup exists and has sufficient token and limit support.

For this mandate, the intended Easy Track recipient is the Liquidity Observation Lab multisig at 0x87D93d9B2C672bf9c9642d853a8682546a5012B5 on Ethereum mainnet. The approved Easy Track configuration should support, as applicable:

  • LDO transfers up to the approved $1.5M equivalent cap for LDO;
  • USDC transfers up to the approved 480,000 USDC retainer/cost cap (for the maximum term of 12 months).

If existing Easy Track instances cannot support the required LDO or USDC transfers to the Liquidity Observation Lab and/or the USD cap for an LDO-denominated transfer amount, new Easy Track instance(s) would be deployed and registered through the relevant DAO on-chain vote. Once available, individual drawdowns should follow the ordinary Easy Track process, including the objection period and any applicable per-motion or per-period limits. The Growth Committee’s activation determination remains a prerequisite for any mandate-related drawdown.

Mandate Structure

Component Maximum amount Purpose Treatment
LDO facility $1.5M LDO equivalent based on the Coingecko LDO closing price in USD on the day before EasyTrack motion initiation Market-making inventory funded from the Lido DAO Treasury Recallable inventory expected to be returned under final documentation or pursuant to a DAO vote or Lido Ecosystem Foundation determination, disbursed only if mandate is activated and services are provided
USDC budget 480,000 USDC Fixed retainer and related costs funded from the Lido DAO Treasury Expense only if mandate is activated and services are provided

Key execution principles:

  • the legal and economic intent is a recallable LDO facility to the market maker;
  • both the USDC retainer/cost budget and LDO facility are to be sourced from the Lido DAO Treasury and transferred to the Liquidity Observation Lab through Easy Track motions, using existing instances where available or newly deployed/registered instances if necessary;
  • Foundation-owned CEX accounts with restricted market-maker API access are preferred where feasible;
  • direct unsecured transfers to market-maker-controlled accounts should be minimized;
  • unused LDO or USDC should remain with, or be returned to, at most within 30 calendar days from the time of disbursement, the DAO or DAO-authorized treasury address; and
  • any deviations from the approved cap or purpose should require further DAO approval.

Market-Maker Selection and Restrictions

The Growth Committee may negotiate with one or more professional market makers. Selection should consider venue coverage, reliability, creditworthiness, cost, reporting quality, willingness to use Foundation-owned accounts, and legal and compliance suitability.

Any final mandate should require that:

  • borrowed LDO is not used for governance voting;
  • activity is limited to two-sided liquidity provision and related inventory management;
  • manipulative trading, wash trading, spoofing, and abusive practices are prohibited;
  • withdrawal permissions are disabled or tightly controlled where Foundation-owned CEX accounts are used;
  • the Foundation or its delegate has reporting, recall, and early termination rights in the associated legal agreements (thus also for the DAO via Snapshot vote); and
  • no call options or similar upside instruments are granted without separate DAO approval.

Risks and Mitigations

  • Counterparty risk: mitigated through due diligence, legal documentation, recall rights, and preference for controlled accounts.
  • CEX custody risk: mitigated by limiting balances, using reputable venues, segregating accounts where possible, and disabling market-maker withdrawal rights.
  • Market integrity risk: mitigated through contractual restrictions and a mandate limited to orderly two-sided liquidity rather than price support.
  • Transparency risk: mitigated through public reporting, subject to confidentiality and legal constraints.
  • Execution risk: the program may not prevent a delisting if a venue acts for reasons unrelated to liquidity.
  • Continued delisting risk: If a delisting is decided upon despite additional liquidity provision commitments, any arrangements with external market makers should include a provision that the agreement ceases upon delisting and does not incur any further costs from that point in time.

Reporting

If activated, the Growth Committee should provide:

  1. an activation notice on the forum in the thread confirming that the Growth Committee made the required determination;
  2. a high-level mandate summary, including intended Easy Track drawdowns, LDO amount, expected monthly retainer, venue/pair scope where disclosable, and whether Foundation-owned CEX accounts are used;
  3. quarterly updates covering USDC spend, outstanding LDO, and high-level performance, including market-maker uptime and the percentage of time agreed liquidity-depth KPIs are met at 50, 100, and 200 basis points from the mid-price; and a completion report, published within two weeks after the program ends, covering LDO returned, USDC spent, and any residual assets.
  4. a completion report, published within two weeks after the program ends, covering LDO returned, USDC spent, and any residual assets.

Material defaults, losses, recalls, terminations, or deviations from the approved mandate should be disclosed promptly where legally and operationally permissible. Lido DAO bears all financial and credit risk associated with the program.

3 Likes
2

Do I understand correctly that instead of incentivizing users to buy and hold LDO thereby creating the necessary liquidity, adding utility, and so on, you are simply proposing to allocate a budget to hire market makers in the event that LDO faces delisting?

3

I don’t understand the poor management of the token and the indifference to community suggestions are what lead to proposals like this, we should pay to avoid being delisted. This is the first time I’ve ever heard of something like this. I’d like to know what the delegators @pgov @polar @nansen think about it.

1 Like
4

Aave basically delisted LDO because it’s a ridiculous token, not because we didn’t pay them

And what if other CEXs then realize that we’re willing to pay to avoid delisting?

1 Like
5

The idea is putting 4,000,000 LDO tokens back on the market. I’ve never heard a worse proposal.

Wouldn’t it be better to invest them to create a vault on Symbiotic, Mellow or something similar that gives this token some actual purpose?

1 Like
6

Thank you for the detailed writeup. We think the mechanism itself is cleaner than most MM mandates we have seen elsewhere. Fixed retainer instead of call options, recallable inventory, an explicit ban on price support and on voting with borrowed LDO are all sensible choices, and we appreciate that they are spelled out.

We also ran the numbers ourselves and do not dispute the premise: average daily LDO volume has fallen from roughly $96M a year ago to about $33M over the past three months (CoinGecko API), and as of September 3, ±2% order-book depth on LDO/USDT sits at only around $50-90K per side on major venues. Before this goes to Snapshot, we would like to understand five things better.

1. Activation. Given the figures above, current conditions arguably already sit close to “insufficient or likely to become insufficient,” yet the factors as written are indicative rather than binding, and the activation determination itself requires no further DAO vote, while individual drawdowns are subject to the Easy Track objection process. We recognize that communications with venues are confidential and not something to detail publicly. Precisely for that reason, the activation notice carries a lot of weight: would the Committee commit to including in it which factor(s) supported the determination and the supporting data at the time of the decision, to the extent disclosable, and to recording activation as a formal, dated committee decision? It would also help to understand what would have to change relative to today for the mandate to be considered necessary.

2. Token-denominated cap. The cap is set in USD, with the LDO amount determined by the CoinGecko close the day before the Easy Track motion. At $0.37 the facility is roughly 4M LDO, but at CoinGecko’s June 25 all-time low of $0.235 the same $1.5M would be about 6.4M LDO, roughly 2.3M additional tokens if a drawdown occurred at similarly stressed price levels. Would you consider a hard cap in LDO terms alongside the USD cap, or a price floor below which any drawdown requires fresh DAO authorization? It would also help to confirm that the $1.5M is a cumulative authorization across all drawdowns, and how cumulative usage will be tracked if motions occur at different LDO prices.

3. Practical revocability. The proposal says a Snapshot vote may end the authorization subject to any remaining terms on concluded external agreements. For comparison, the stETH/LDO accumulation mandate approved earlier this year states that no minimum notice period is required and the DAO retains the right to recall funds at any point. We understand an MM engagement realistically needs some commitment period, but since the proposal only commits to a high-level mandate summary rather than publication of the underlying agreements, what maximum termination notice period and/or termination cost do you consider acceptable in the MM contract? Without some bound on notice periods and termination costs, the revocation right risks being nominal.

4. Drawdown structure and reporting. The same stETH/LDO mandate draws funds in batches, with a report published after each batch, including confirmation that the trigger conditions remain met, before the next one can be pulled. Here the DAO bears the full financial and credit risk, yet once activated the proposal requires only quarterly performance reporting. Would you consider a similar structure: staged drawdowns, with a report and confirmation that the activation conditions still hold before any material additional LDO or USDC is pulled?

5. Scope of inventory management. The proposal says any final mandate should limit activity to two-sided liquidity provision and “related inventory management.” Does that permit the market maker to lend, rehypothecate or pledge the LDO inventory, or is it limited to quoting and rebalancing across the designated accounts? Recall rights are only as strong as the inventory’s actual availability, so an explicit contractual exclusion here would meaningfully reduce counterparty risk.

One additional clarification: would the mandate summary disclose what share of inventory, if any, sits outside Foundation-owned CEX accounts?

None of this is an objection to having a pre-approved contingency plan, which we agree is preferable to rushed governance during a venue review. Our concerns are about verifiability and the practical limits of DAO control once the mandate is signed. Clear answers on the points above would go a long way.

8

For some reason, you invariably approve proposals that entail expenses, yet you have never once supported ideas from external users aimed at generating revenue. This raises serious questions regarding project management and how “in-pocket” delegates make decisions

9

Just to be precise: we have not approved anything here. There is no vote yet, and our comment above is a set of questions about spending controls, with our vote explicitly conditional on the answers. If the mandate goes to Snapshot without movement on activation transparency and recall terms, voting against it is very much on the table.

More broadly, we regularly vote against spending proposals when the controls behind them don’t hold up, in Lido and elsewhere. Our full voting record and the reasoning behind it are public, so this is easy to check rather than take on faith.

On revenue-generating ideas: delegates vote on what actually reaches a vote. If you believe treasury LDO would be better deployed productively, for example the vault idea mentioned upthread, the way to get delegate support is to write it up as a concrete proposal with numbers and a risk section. We would genuinely engage with it on the merits, and it would not even be mutually exclusive with a contingency mandate like this one.

10

Thanks for answer @cp0x

But for some reason, I haven’t seen any responses, clarifications, or objections in “proposal” ar any topics that didn’t originate from the project team or developers close to the project.

This isn’t directed at you or your company personally; it applies generally to all the delegates who vote.

Thanks.

1 Like
11

That is a reasonable point, and I agree. I also believe that market makers are indeed necessary."

1 Like
13

Thank you for good comments and questions.

  1. Yes, to the extent it does not hinder our ability to negotiate requirements with exchanges and/or market makers. We can also commit to a notice of activation, see also communication around stETH/LDO trades for reference, for instance.

  2. The preference is to keep this in USD primarily; however, we understand the concern and are fine to cap the LDO amount at 7.5M LDO (6% of LDO in the Lido DAO Treasury as of Sept. 3, 2026).

  3. We generally seek a 30-day notice period for termination by either party in any negotiated agreements.

  4. While the LDO facility will need to be drawn in full at the initiation of such an arrangement with a market maker, the budget drawdown (USD stablecoin component) can be staggered in quarterly tranches to align with the common payment schedule (frequently quarterly, pre-paid). We can use similar reporting processes here as for the stETH/LDO trades.

  5. We would not be looking to impose additional constraints on the market maker here. Ideally, we would like to avoid the loan and associated credit risk as a whole as we do for stETH but that is significantly more challenging and/or costly in the case of LDO (stETH exposure is much easier to hedge). Counterparty risk here is mostly to be understood in terms of the market maker’s default risk; since any loans would be unsecured, we are not primarily concerned with their LDO stock during the contract term and prefer to obtain the best pricing possible without imposing additional constraints on the market maker’s balance sheet management.

14

Why do proposals that bring value accrual to LDO always sink without a trace? Why is there no willingness to embrace long-term holders? Turn LDO into a means of production and create real demand.

When a DAO consistently ignores the core demands of its community, it is actively pushing all LDO holders to the opposite side. The facts are already clear: without value accrual, LDO is being marginalized. Our valuation has fallen far behind protocols like Uniswap and Aave, which are still growing rapidly.

Right now, mechanism reform is the core. If we only patch the old framework without changing the fundamental logic of value accrual, LDO cannot escape its current predicament. In fact, the market has already given a clear answer — we need to create real demand for LDO.

We also need to look at the macro backdrop. The Clarity Act is gradually moving forward, and ETH is a foundational layer of the future blockchain economy. As this trend becomes more certain, we must answer a deeper question — what role should LDO actually play in the Ethereum ecosystem? A secure protocol must also secure its own foundation.

stETH is powerful, but that power is not irreplaceable. A brand moat is what lasts. And LDO should be Lido’s most important brand moat. If we believe LDO will be strong in the future, we should make it harder to replace — both for LDO itself and for the future development of the Ethereum ecosystem.

So please, turn LDO into a means of production. Now is the best time to build.

Please do not sacrifice the most important protection — the people who still believe in this protocol — for short-term gains.

1 Like