Lido Referral Program

UPDATE - 20/7/21: The Lido referral program was launched successfully on July 19th, 2021. Visit referral.lido.fi to learn more.

Hi there,

In the crypto world of DeFi, many protocols use rewards programs and I think we should do the same. The reward program will serve as a marketing strategy to attract more people to use the protocol. With more and more people using the protocol to stake ETH there will be more benefits for the whole community. The idea is to promote Lido should be promoted not only through individuals but also through wallet software and other DeFi protocols.

Thus, I propose to launch the Lido Referral Program designed to facilitate the growth of Lido’s staking solution and incentivise existing users to spread the values of Lido. I drafted a more or less formal proposal and I’m looking to hearing feedback from you.

Motivation

Word-of-mouth marketing and various reward programs (e.g., airdrop rewards, referral rewards) are highly effective growth marketing techniques designed to boost brand awareness and adoption of decentralised distributed ledger protocols. Moreover, the Program will encourage software developers of wallets and other DeFi protocols to promote our staking protocol among their users, and will positively impact the number of active stakers, and subsequently, the amount staked with Lido.

Conditions

The following conditions are proposed:

  1. Users are given the ability to generate a unique referral URL that is specific to their Ethereum address.
  2. A Referrer will receive LDO as a reward after her/his Referee (new user) staked at least 1 ETH using the unique referral link.
  3. The Lido Referral Program does not have any timeframe. The Program ends when there are no more tokens in the Reward Pool (i.e., the total amount of LDO tokens that can be distributed to participants of the Program) or when the DAO makes an active decision to cancel it.
  4. The DAO can cancel or pause the Program at any time.
  5. The DAO determines the LDO Token Reward.
  6. The DAO determines the size of the Reward Pool.
  7. The DAO can at any time change the LDO Token Reward and the size of the Reward Pool.
  8. The DAO can at any time change the way the Lido Referral Program is implemented.

Proposed LDP Token Reward and Reward Pool

The proposed size of the Reward Pool is 15m LDO. The proposed LDO Token Reward is 15 LDO for 1 ETH staked. It means that if a Referee stakes 10 ETH, her/his Referrer is rewarded with 150 LDO Tokens.

Implementation

There are many ways in which the Lido Referral Program can be implemented. An example of one of the most cost-efficient options is provided in this proposal. Nevertheless, the DAO community is welcome to share their opinions regarding alternatives supported by valid arguments.

The following implementation of the Lido Referral Program is proposed:

  1. A participant gets a unique referral link. It will also be possible to indicate the address during an interaction with the smart contract. Developers of protocols and wallets, please, read the following two guides.

  2. Guide for protocols

  3. Guide for wallets

  4. 15 million LDO tokens held in the DAO Treasury will be reserved for the purpose of the Lido Referral Program.

  5. Every two weeks from the start date of the Program after the voting necessary to move some part (200 000 LDO for example) of LDO tokens, Rewards will be transferred to a dedicated blockchain address* and, then, subsequently, within 7 days to Referrers using the L2 Ethereum scaling solution Arbitrum.** It means that there are about 26 Reward Calculation Periods and 26 Pay-out Periods within one calendar year*** as the table below illustrates.****

Reward Calculation Period
[01.07.2021-15.07.2021]

Pay-out Period
[15.07.2021-22.07.2021]

  1. If for whatever reason there are any errors in the calculation or transfer of allocations of the Rewards to any Referrer, the error can be rectified in any suitable way (e.g., if the Referrer received more Rewards than it is supposed to, he would not receive Rewards for further referrals until the mistake was corrected).

*Tokens for further distribution will be moved to this address only after on-chain voting. Currently, there are no technical possibilities to allow the DAO to control this wallet directly. Hence, I suggest nominating me as a controller of the distribution wallet on behalf of the DAO. If somebody has a suggestion of a reputable member(s) of the Lido DAO community who could take control over the address, please, list your candidates in the comments below.

**In the future the Lido Referral Program may be implemented utilising another cost-efficient solution (e.g., Optimism ) in addition to Arbitrum or instead of it. Our community will be updated on any relevant changes to the implementation of the Program. If you have other ideas on how the Program could be implemented, please indicate this in the comments below.

***There is no guarantee that the Lido Referral Program will last for one year as the DAO may decide to cancel the Program at any time or the Reward Pool may be exhausted within less than twelve months.

**** The table is provided for illustrative purposes and it doesn’t include all possible Reward Calculation Periods Pay-out Periods

Implementation date

If this proposal is successfully approved, the Lido Referral Program will start on 22 Jul 2021.

8 Likes

I like the idea as this incentivizes other protocols to right away build on top of stETH rather than having to request a grant from the Lido DAO.

  1. Would it be a good idea to have a time lock on the LDO referral rewards?

  2. Is there a way to prevent this from being gamed? A referee could come in to stake ETH, exchange stETH to ETH and then stake ETH again. Rinse and repeat until the reward pool is drained and share the rewards with the referrer.

7 Likes

Agree with JK here, idea is great but there needs to be some mechanism to make gaming this impossible/unfeasible. Another side effect of the scenario JK is describing is that it would put significant pressure on the stETH/ETH peg.

4 Likes

I do like the general idea!
However, biweekly on-chain voting to distribute the rewards adds extra fuss around Lido governance, doesn’t it? We could probably wrap it into an easy track motion in the future if both referral program and easy tracks prove efficient.

1 Like

Such behavior can be tracked and excluded from referral program, lock can help too.

Curve arbitrage bot should be excluded too.

1 Like
  1. Sum of referral rewards is not so big for locked. I think that it’s disproportionate for this risk.

  2. This is good point. We should add people who disbalance incentivzied stETH pools to disqualified list.

If this was to happen I’d take all my stETH out into ETH, and re-invest with my own promo code. Not sure if thats the desired behavior but pretty sure others would do this too. To get around blockchain inspections I’d use tornado cash to move my ETH around.

Perhaps a simpler mechanic to achieve a similar result is to offer LDO in addition to staking rewards. This is pretty similar to the LDO airdrop thats already been done, but if done with a set APR with a pre-determined amount of time it could see a huge amount of ETH flow into stETH. When the rewards stop naturally some stETH with be converted back to ETH, but I’d be willing to bet that a large amount of ETH would stay locked up. With more ETH in stETH, defi protocols should have an incentive to work with stETH.

2 Likes

Of course. I’m absolutely agree that is a good goal for changes in the future.

I don’t have strong opinion about curve arbitrage bot, but I think we should exclude people who imbalance incentivized pools for stETH, including ones using Tornado Cash. Given that the proposed referral program explicitly can be adjusted by the DAO, we can react to funny business even if we didn’t see it coming ahead, and that in turn will discourage funny business.

2 Likes

It might also be a good idea to ask protocols that distribute rewards every week to users how they filter abusive behavior. I know that Rarible has gone through considerable effort to reward $RARI to unique users on their NFT platform.

1 Like

As I wrote above, we have the means to deal with abuse.
For example, to add them to the disqualified list.

2 Likes
  1. should there be a cap reward per referree? perhaps. otherwise, for example, a whale could self-refer, stake and then unstake and instantly grab all of the epoch rewards.

  2. should there be a minimum staking time period requirement to trigger the rewards? I think so. See above.

  3. should the referral link build in an ‘i am not a robot test’ on both sides (referrer and referree). I think so for various reasons. E.g., see above.

could be achieved by requiring minimum staking period for reward payout.

This sounds great in theory, but most likely it will have to come with practical restrictions on the further utilisation of stETH converted for, as sending the stETH to any other wallets / contracts other than the initiating wallet would violate the minimum staking period.

An incentive mechanism where Lido stakers receive LDO rewards + staking rewards would be even better and fairer imo.

This proposal is cool. Am sure there are many people who have Eth but haven’t heard of Lido services in terms of putting their idle eth to work. This will provide incentive for people to talk to more people about lido. heck, youtube and other social media influencers/creators might even jump on. this is a step forward in the right direction.

In a short discussion yesterday there’s been a thought that it might be a good idea to cap first couple weeks of the program reasonably low, to prevent large-scale subversion of the program. I think it’s good idea.

1 Like

Thinking about this on the weekend. One other side effect of the program would be to inceltivize existing users of Lido to stake ETH that they have in other wallet or perhaps have locked in vaults.

For example I keep a bit of ETH for GAS in a couple other wallets. This promo would incentive me to send some of that ETH and stake it for the LDO rewards.

Secondly it would incentive me to get any ETH i have in say vaults, by repaying the loan, getting my ETH out and staking it.

A lot of this user behaviour will come down to the tracking, the more scrutiny, the less likelihood of existing Lido users moving funds around to get the LDO reward. With that in mind what do you have in mind? With over 14 000 wallet address trying to do this manually on excel is out of the question. Most likely you would need to leverage some analysis’s software that specialising in defi and erc-20s like:

The other option is writing your own scripts. What do you guys have in mind to monitor the the campaign and reduce unintended behaviour?

Thanks @Alex_LIDO for kicking off the conversation. Customer acquisition is an interesting use of DAO treasuries, and this is a welcome starting point for discussion.

Net: The idea of an incentivized referral program is compelling. However, use of DAO resources should be approached with caution, particularly if there’s potential it can be gamed.

Questions

IMO, there are several key questions for the community to build consensus around:

  1. Efficacy. How many deposits do we anticipate a referral program like this could drive? Would it be consequential to Lido? Is this a better use of the DAO’s treasury than alternatives like protocol development, staking insurance, etc?

  2. Evaluating success. One potential risk to the proposal as described is the lack of a clear framework for how to measure, optimize, and ultimately assess success. What’s the right way to measure the success or failure of the referral program (or any other allocation of the DAO treasury)?

  3. Program size. How much LDO should be allocated to the program? Should it be scaled up as a smaller experiment at the start as @vsh suggests above? At current prices, 15M LDO is ~$30m, and roughly 6% of LDO in the DAO’s vaults.

  4. Reward size. What is the optimal ratio of LDO rewards to ETH deposits? Is it better parameterized dynamically, i.e. sensitive to the size of the project, stETH liquidity, etc. rather than statically? SAt current LDO and ETH prices, the reward is a ~1.3% rebate on ETH deposits (if farmed).

  5. Implementation. Should tokens be non-transferable or vested? Should rewards be allocated up-front, or subject to governance? Should they be capped on a per-user basis? Sybil resistance is critical, can we avoid the gamification and spam that can be triggered by growth initiatives?

4 Likes

Thank you all for your questions.

I am currently preparing a proposal update that will answer them.