Liquid stETH/ETH pools via incentivized LDO token distribution rewards

Proposals
1

This proposal is a little early since the protocol just released staking and also that there are no current ETH rewards (deposit queue which new validators will be confirmed by around January).

The motto of Lido is a liquid staking solution to Ethereum that does not require the 32 ETH deposit minimum nor does it require a lock-up period in which a user cannot unstake their ETH.

To guarantee that a user can unstake their ETH, a stETH/ETH pool should be maintained at a 1:1 basis.

To specify:

  • With official Ethereum 2.0 staking, participants cant unstake their claim until Ethereum moves onto Phase 1.
  • Users who want to stake in Lido (advertised as a liquid solution) will want to be able to unstake their ETH. How is this possible? They will use the stETH/ETH pool which is maintained at a 1:1 basis. As an alternative, you can ‘unstake’ your ETH by swapping your stETH back to ETH.
  • A stETH/ETH pool is necessary for the mechanism to work. If there is no liquidity then nobody can unstake. Lido is the liquid solution to Ethereum 2.0.

I propose to distribute a portion of the 36% of the LDO token supply–which is currently held in the treasury–to people who staked their ETH for stETH in the recent launch, supplying their ETH to the stETH/ETH pool. Since there was a mention of no airdrops, no sales, ICO, IEO, etc, I think the simplest solution is to also designate a portion of the supply to farm the LDO token via LP strategies, in that way, people will be incentivized to keep Lido liquid, where participants can unstake their ETH at any time.

I have also mentioned before that it would be interesting for users to farm the LDO token using other DeFi respective protocol tokens Lido intends to integrate with. Farm LDO with CRV, BOND, AAVE, SNX, YFI etc… Every DeFi protocol that intends to use an ETH liquid solution.

4 Likes
3

A possible scenario is to create a pool/farm where users can stake their stETH in Lido itself (not talking about third-party DeFi protocols, that comes later). That way, LDO is rewarded to early adopters, those that have stETH. But what about those that only purchased stETH and have not minted it (those that only wanted to arbitrage)?

If it’s possible, there could be some mechanism that can differentiate between those that have minted stETH via Lido staking and those that have only purchased it through a liquidity pool (Uniswap). I propose that staking will only be available to those that interacted with the minting contract. That way, those that genuinely interacted with Lido–and not those that wanted to make a quick buck–will be rewarded fairly for their actions.

4

It is absolutely important to bootstrap liquidity for stETH and hence, incentivizing stETH/ETH LPs makes a lot of sense.

2 Likes
5

Considering the slippage, I think the incentive should be given to CURVE.
Let’s get stETH adopted like 3pool and make it a de facto standard.

2 Likes
6

Good idea! I think it’s already happening too.