When I say, “New products should use stETH as the foundation,” it has less to do with staying in our comfort zone and more with building on our “unfair advantage.”
Going to other ecosystems
That’s why I would not go to any other ecosystems. Not only are the conditions usually not optimal to make an LST successful, and the waters are swimming with competition, but Lido has very little of this unfair advantage against them. You could even argue that Lido would be disadvantaged because new projects start with a bloated valuation and outspend Lido on token-based incentives.
Scaling vertically
As to horizontal vs vertical scaling, it’s becoming increasingly clear to me that the LST category is becoming saturated, and hence, Lido has little room to grow.
Moving upstream in our vertical is possible, but I am convinced that scaling horizontally to other verticals is better. With going upstream, what would convince me is a) Lido can produce something with much better UX that increases downstream demand for stETH, and b) Lido can reduce a key dependency and/or capture much additional value.
I don’t see it for a) at all, and b) it is truer but debatable. Restaking has likely peaked now, and with Symbiotic, a new player is launching soon to reduce the power of Eigenlayer in that layer. Aave is the big gorilla in the credit layer, but our protocols have a good relationship, and the Lido isolated market on Aave is shaping to be a great collaboration. No one seems to be extracting excessive rent from Lido stakers right now.
These things might change, and then we should change our minds, and it’s good to think through what that might look like in advance. So, I appreciate the question.
Scaling horizontally
Horizontal scaling, on the other hand, looks like a better option to me. There are clear user segments in staking that are not currently served well by stETH because they want better access to leverage, better access to restaking/points, or more customization around their node operator setup.
What matters here for this to be a good strategy is whether Lido contributors/researchers can find a way to offer these products while reusing as much as possible from Lido’s existing infrastructure and stETH’s network effect and liquidity moat. Some early thinking on how that could look in my other response.
Finally, when a horizontal scaling strategy can work, it usually leads to better financial outcomes for the DAO because the same fixed-cost infrastructure can be reused across a larger base of users.