Updated: Lido Kusama+Polkadot LS by Mixbytes()

Some thoughts:

Polkadot has super high USD amount staked, so seems like a good market where decent fee can be captured and I’m happy to see a proposal here.

Firstly, I am skeptical that 3x’ing the stakers’ fee is viable. This proposal suggests a 10% fee to staker, and I currently pay around a 3% fee (using p2p.org). How do you justify tripling the avg market fee? What is the incentive to use stDOT and pay 3x more for the liquidity for users?

Next, the LDO compensation seems extraordinarily high, particularly for the 2% milestone. I’m try to convert everything into USD terms, please correct any of my bad math:

  • The current proposal suggests that Polkadot earns $3.5m (I am assuming annually?) at current prices w/ 2% share and Kusama earns $330k w/ 2% share.
  • MixBytes share is 20% of Lido’s fee, so MixBytes earns $700k per year and $66k per year respectively on their revenue share.
  • MixBytes is requesting $6m in payment for this work.

In this scenario, MixBytes gets paid a lot of money for an outcome which I would describe as being close to failure – 2% market share for Lido would be a bad outcome IMO.

Beyond this, will MixBytes later propose LDO emission incentives for stakers? Since 2% seems extremely small and likely just on Lido brand alone, with LDO emission it becomes trivial since stDOT APY will be larger than other staking methods. It seems circular to pay out LDO for paying out LDO. At the same time, it seems like a good strategy to quickly capture marketshare and increase revenue, so it would be in the DAOs interest to do it. Will MixBytes later propose LDO emission incentives for stakers if targets are not met? If so, is this also paid from the DAO, or reduced from MixBytes payment?

As we reach the second milestone, which is a much more accurate representation of success:

  • MixBytes is requesting a further $6m for growth of marketshare from 2-20%
  • Lido will earn ~$38m annually if this is achieved
  • MixBytes will earn ~$7-8m per year

In this instance I support the LDO payment more here than the prior milestone, but now the revenue share for MixBytes seems extraordinarily high. From Lido’s POV, it’s 20% leaked revenue, almost 8 figures usd per year, in maintenance costs which seems inefficient.

I’m unsure if Lido should think about revenue share with co-building teams as maintenance cost or otherwise – what is the best example on the market that can be used as a reference? How did you come to this 20% of Lido’s revenue fee figure?

Does anybody agree that the compensation size seems large and miscalibrated?

I personally believe KPIs should not be a temporary market share, but instead be maintaining such a metric over a meaningful period – eg. 20% market share sustained for 1 year is meaningful if prices remain at a level such that 20% market share’s revenue is similar to the current projections from the proposal. 20% market share for 1 day is vanity and achievable using perverse incentives.

Finally, I feel the proposal is a little bit lacking in detail for such a large request. In general, I’d like to see a more established and rigorous plan in place when requesting a $12m payment rather than a bullet-point list of ideas and a 3-month rough technical roadmap.

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