Lido for Polygon - Proposal by Shard Labs

Hi,

As a user of Polygon, I like seeing a proposal to create stMATIC with Lido. On a back of the napkin calculation the fee and payment structure proposed looks good, yet it would be good for Lido to have a more complete analysis on the economics of the deal. One similar to the Delphi proposal for Aave would be great. If you need any help putting together a model, I can help out, I am not that familiar with the staking economics but I can get up to speed pretty quickly.

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Absolutely agree with this proposal. Let’s get it done.

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Definitely makes sense. Will try to get someone from the Polygon team to also join us on this topic.

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Thanks @Edi_ShardLabs for kicking off this proposal, and for Shard Labs’ excitement and support.

Zooming out, I like the general motivation behind the proposal and that it could be mutually beneficial to both Lido and Polygon if structured correctly.

A few specific questions/comments:

  1. Understanding the economics. I strongly agree with @josebaredes’s point – from Lido’s perspective, the critical point is to understand the rough “payback period.” It would be helpful to share a table e.g. showing the anticipated fee stream currently, and it’s sensitivity to 1) the amount actively staked 2) changes in yield as a result 3) other fees, like the proposed revenue share.

  2. Another DAO? Can you clarify: “In the initial version, governance decisions will be carried out by the Lido DAO. If the decisions become more frequent or complex, there is a possibility to spin a new DAO.”

  3. Long-term alignment. If the goal of LDO-denominated compensation is “[alignment] with the long-term success of the Lido DAO”, would you be open to adjusting the terms to a 1y cliff, followed by a linear 1y vest? This is identical to the terms other Lido contributors such as Paradigm have received.

  4. Revenue share. What is the motivation for the revenue share fee in addition to LDO compensation, and how did you settle on 20%? Without context on what this represents (in rough notional terms), it’s hard to reason about – this is where illustrating (1) could help as well.

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Hi and tnx for the questions.

  1. Definitely agree this is a crucial part and we are currently working on it.
  2. Another DAO would only be created in a case where there will be a lot of governance proposals for the current one. Idea there is only for it to be spun off if there are too many governance decisions for the current/main one).
  3. We are definitely open to doing it this way. I think that most important now is under 1. to have that clear and then all the other stuff can be discussed and changed accordingly.
  4. This is actually an even better representation of the success of this implementation as revenue share will directly be impacted by the success of the Lido on Polygon, where LDO token price depends on multiple other factors outside Shard Labs’s team reach. That’s why a combination of both is proposed, so Shard can participate in the overall governance of the LIDO ecosystem without a need to sell LDO tokens to pay for the team and other expenses. 20% was taken from the Chrorus One proposal for Lido on Solana.

Definitely feel free to propose what in your terms would be the most balanced proposal to have both Lido and Shard sides aligned for the longevity of the project. And I will update comment with economics.

And just a note, anyone coming to ETHCC let me know. Maybe we can even organize a live session with discussion around this, my handle is here: https://twitter.com/edisinovcic

@arjunblj @josebaredes proposal has been updated with the tokenomics, new DAO has been removed (as there is no need for it) and lock and vesting periods have been updated.

Please take a look and give us feedback on the proposal itself.

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Hi,
Wonderful proposal would love to see this in play. Given that MATIC staking is done on Ethereum and majority of the users actively interact on the Polygon POS side chain, it would be really awesome if you could support staking on the Polygon chain itself. So roughly

  • User interacts with the Lido contract on Polygon chain locking up MATIC
  • Contract issues stMatic to the user on Polygon, which can be used as you have detailed
  • Contract bridges the tokens to Ethereum at some batched interval
  • On Ethereum - stake the Matic tokens as normal with the validators.
  • charge fees additionally for the bridging, but it could be lower given the batching of funds.
  • withdrawal on Polygon would have a delay since it would require and unstake and bridge back
  • instant withdrawal could be facilitated via a stMatic-Matic liquidity pool

I think this would give more flexibility to users who are natively on the Polygon chain and shy away from the main chain for high txn costs. This will open up additional yield option natively on the Polygon chain. Additionally quick withdrawal LP’s also give additional revenue options.

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Apologies for being late to the party. I was wondering if you could provide an argument for why Lido shouldn’t model the incentive structure to match MixBytes incentive structure? As the grunge-rock musician said to MixBytes’s first proposal, 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.”

After critiques MixBytes adjusted the vesting schedule so that 3/4 of the vesting rewards become unlocked once Lido captures 20% or more of Polkadot ecosystem. image

And Mixbytes is capturing 20% of Lido’s Net fee, not 20% of total fees. image

Im not against providing different vesting packages to different teams/products as long as there is good reason to do so.

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This is planned for the v2.

For now, we want to make the first production version live with later doing upgrades like this. This definitely aligns with our long-term plan. Tnx for the great feedback and keep it coming!

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Yeah, I generally agree with this.

After a separate conversation with @frontalpha, we’ve decided to vote No on the snapshot in the hopes we can put a more generic process in place (see here) for these integrations in order to have better comparisons amongst them.

Edit: this is something we’re working on right now and expect to have at last a draft for in the next week.

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That is the case for Shard Labs proposal as well though.

As the lead development partner of Lido on Polygon, we suggest that Shard Labs receives 20% of the fee going to the Lido treasury, while the treasury itself retains the rest.

I ask yall to provide some clarity to Shard Labs here.

We had a proposal open for comments for the week, but only provided some discussion after it was started. Now we’re not in undesirable position, where we can’t easily amend what’s being voted on.

Their options are to drop this vote and resubmit a new one, or continue as is, and what to do here depends on whether the opposition is strong compared to support, so highlight your position here please.

The worst outcome would be continue the vote as is and not have a meaningful discussion nor quorum at the end - let’s avoid this. Dragging this stuff on too much is also undesirable. The vote is half-blocking Shard from starting to actually work on the stuff or dropping it, and time to market is the key to victory in liquid staking.

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Yeah, that’s fair, and, to be clear, I’m weakly in favor of not having this proposal pass before we have a better process. I understand the team did a bunch of work prior to the idea of having a harmonized process coming out.

Personally, my main question is whether the fact that more incentives get paid out earlier here (vs. the Mixbytes proposal) is a significant factor to Lido. If everyone is fine with it, then it’s not a hill I will die on, but otherwise it’d be nice to see the rationale for the difference or otherwise see them harmonized.

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Ok, let’s talk ROI here.

For the first milestone of 2.5% captured MATIC Lido will issue LDO tokens vested for 2 years in amount of 100000 LDO tokens. This means that due to above numbers in tokenomics Lido DAO gets this investment back in 17 days and considering that we have a window of 30 days where this has to be maintained then there is NO risk for Lido DAO. For all the rest there is even better tokenomics for Lido. Even if the token value doubles there is a marginal risk for Lido DAO.

Also we already have POC almost available for the Polygon on Lido (release probably next week) and it would make no sense to kill this proposal for the reason that “there has to be standardization”. There is a bunch of competition just waiting for us in Lido ecosystem to slow down so they can take the primacy. Time to market is crucial and we can’t waste our time here.

Also on the comparison of Polygon vs Polkadot/Kusama, first has thriving defi ecosystem that we can incorporate with and on the other we have a promising ecosystem (which in my opinion has great potential) but potential isn’t equal to the what already exists on Polygon.

Let me know your thoughts on this @timbeiko @frontalpha

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Yeah, I think it is unwise to hold up this proposal in an effort to standardize a vesting package. Bias for action is more important right now and I think coming in here guns blazing was silly in hindsight.

If Tim and I want to create a standardized vesting concept we shouldn’t take it out on something that was already planned.

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Ok, so do we have green light from you guys also to proceed?

I would prefer proposal to pass with all of us agreeing this is beneficial for all sides and not have a friction due to voting being split.

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Im happy with this. I swapped my vote.

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Tnx for the support.

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Yeah, +1 to this. Also swapped my vote! Appreciate your engagement in this :+1:

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https://snapshot.org/#/lido-snapshot.eth/proposal/QmXGtNCDeVMXgbKcsbg9br4GNDkXLg52f6dbGDXFR3yohh

The proposal voting link hadn’t been posted here, so here it is.

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