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:
- a contingent LDO CEX liquidity mandate for up to 12 months from activation;
- 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);
- LDO $1.5m equivalent based on the Coingecko LDO closing price in USD on the day before EasyTrack motion initiatio;
- a budget of up to $480k in USDC from the Lido DAO Treasury (in addition to the approved EGG budget);
- 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;
- authority for the Lido Growth Committee to coordinate implementation and for the Liquidity Observation Lab to support execution and onward operational disbursement;
- disbursement from the DAO treasury to Liquidity Observation Lab through Easy Track transfer motions; and
- 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
0x87D93d9B2C672bf9c9642d853a8682546a5012B5on 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:
- an activation notice on the forum in the thread confirming that the Growth Committee made the required determination;
- 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;
- 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.
- 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.