LP Rewards to Bootstrap Lido for Solana

Proposals
1

Lido just expanded to Solana with a full-fledged liquid staking solution for SOL staking ($stSOL) built by the Chorus One team. This proposal concerns bootstrapping liquidity for stSOL on leading Solana DEXes with LDO from the DAO treasury.

Background
The native Solana token SOL has recently entered the top 10 cryptoassets in terms of market capitalization. Solana has managed to attracted many high-profile projects and institutions looking for a scalable blockchain substrate, especially for financial applications that require high throughput and low cost transactions (e.g. Serum (orderbook DEX), Pyth (market data), Mango Markets (perpetuals), and many others - including AMM protocols like Raydium, Saber, and Mercurial Finance).

The main goal for stSOL is to be integrated as collateral into DeFi applications in the Solana ecosystem. With stSOL, Solana DeFi stands to get access to billions of dollars of collateral without users having to forgo SOL staking rewards (which at current rates amount to around 7.5% APY).

With this proposal, we want to propose moving a first batch of LDO tokens to Solana to bootstrap stSOL liquidity integrations and to get LDO into the hands of Solana users.

Proposal

  • Move 800,000 LDO to an account on Solana that is governed by the Lido DAO (if possible the 4/7 multisig)
  • Distribute 800,000 LDO to different liquidity venues over a 2 month (60 day) period (in the spirit of having a more diversified liquidity strategy from the start):
    • Raydium stSOL/USDC (250,000 LDO) and stSOL/ETH (250,000 LDO) liquidity pools: Raydium is the OG of AMMs on Solana with over $1bn TVL and the largest trading volume ($500m+ a day). Raydium integrates with Serum liquidity to provide users with an optimal price quote.
    • Saber stSOL/SOL liquidity pool (150,000 LDO): Saber is a fast-growing StableSwap automated market maker on Solana with aTVL of above $2bn at the time of writing.
    • Mercurial stSOL/SOL liquidity pool (150,000 LDO): Mercurial Finance is an automated market maker protocol that aggregates liquidity from Serum, can support multiple assets, and is currently #5 in TVL on Solana with total liquidity of over $150m.

Details
The liquidity incentives given in LDO will be matched by Saber (around 50k SBR/day) and Mercurial (around 1.223m MER over the two months) through their own liquidity programs. This will mean liquidity providers for the stSOL pairs on either will stand to earn both LDO and SBR/MER tokens respectively.

Because stSOL is value-accruing - in contrast to Lido’s stETH, which is rebasing to be pegged to ETH (which is not possible on Solana at this point) - the Mercurial team will work with us to adjust their liquidity pool to minimize the potential for impermanent loss for LPs in the short run. This will involve making use of our internal price oracle to adjust pool parameters as the stSOL to SOL exchange rate increases due to accruing staking rewards.

Analysis
We have done an analysis of the resulting APY for various liquidity depths to ensure Lido for Solana. We also did an analysis on the payback period of these incentives for Lido given the SOL staking APY and assumed TVL levels. They can be found here. The TL;DR is that for a given liquidity depth per pool of $50m (i.e. $200m total liquidity), the APY for LPs would outperform purely holding stSOL between 10-20% for the duration of the incentives. Given the assumptions, LPing would outperform simply holding stSOL for up to $250m per integration ($1bn in total liquidity). The analysis also looks at the time it would take for the Lido DAO to receive back the money in LDO spent on these incentives (and Chorus One’s token grant), which e.g. comes out at 9 months (given a 5% market share and the other assumptions).

It is important to note that unlike Lido on Ethereum, our liquid staking solution on Solana does support withdrawals. Nevertheless, we believe the primary way to exit a staking position with Lido should be through AMM swaps, as withdrawals will expose the user to Solana deactivation periods and thus we expect this function to be taken on by more sophisticated users (such as market makers that arbitrage withdrawals from Lido and the secondary market).

Bridging to Solana
We believe having LDO on Solana is a major step and are looking to establish a path to also bring stETH to Solana and stSOL to Ethereum. The actual transfer of LDO from Ethereum to Solana will be done via the Wormhole v2 token bridge that is about to launch.

If this proposal will pass the Snapshot vote, a payment of the 800,000 LDO discussed in this proposal will be added to an upcoming Lido omnibus vote (expected Sep 16) and will be bridged to Solana from where it will be distributed to the respective AMM pool liquidity mining contracts.

9 Likes
2

Snapshot vote (will run for a week): Snapshot

3

What will LDO be called on Solana? sLDO?

4

I would assume it should just be LDO similar to USDC/USDT etc. Possibly a wLDO to indicate it is not in fact a native Solana asset.

3 Likes
5

Saber stSOL/SOL pool is live w SBR rewards already: Saber | Solana AMM

Same for Raydium stSOL/USDC (not cross-incentivized): https://raydium.io

2 Likes
6

How the payment would be managed, and what’s the schedule for LP rewards seeding to the pools? Something like transfer to multisig + monthly payments to the pool incentive programs?

8

Good question, we are looking into this right now. We were initially planning to distribute directly from Lido DAO Finance through Wormhole to an account controlled by the multisig on Solana. Now it seems the Wormhole requires some extra manual interaction/confirmation on both the Ethereum and Solana side, so it’s currently unclear if we will be able to do this without some kind of intermediary account. Will follow up on this.

Wrt seeding, all of the AMMs discussed have some LM incentive distribution contract that you can deposit tokens to and specify the length (in blocks) of the LM scheme. The multisig (or - if needed - an intermediary account again) would need to do that deposit specifying the parameters discussed above.

1 Like
9

It’s mostly me asking about what kind of scripts / actions would we have to include into Omnibus / any other vote on Aragon =)

10

What is the date when those incentives start to accrue for LPs?

11

Raydium has deployed the pool (stSOL-USDC) but the farm to deposit the LP tokens isn’t live yet.

Saber rewards can be earned from the stSOL-SOL pool

12

Will update that here, but it will be at some point in the coming 2-3 weeks.

1 Like
13

The LDO transfer from Ethereum to Solana through Wormhole for the first month (400,000 LDO) has been completed (initial transaction from the DAO here: Aragon).

We are planning to begin distributing incentives from the Lido for Solana multisig early next week. We are also suggesting to do a minor adjustment to one of the pools after some discussions with others Lido stakeholders: namely, we believe that the Raydium stSOL/ETH and the corresponding 250,000 LDO over 60 day incentives should be switched with an Orca stSOL/wstETH pool and moving the 250,000 LDO incentives there. The rationale for this is described below:

With Wormhole v2 going live between Ethereum and Solana, there is now a sustainable path to bridge stETH to Solana in a trust-minimized fashion. The rationale for the originally planned stSOL/ETH pair on Raydium was based off the large observed volume that Raydium has for the SOL/ETH pair. With Wormhole v2 becoming available, there is now an option to create a liquidity pool against wstETH (the wrapped version of stETH has to be used on Solana since rebasing is not supported), which has the benefit of creating demand for another Lido asset, instead of an unrelated asset (ETH). In addition, it also allows LPs of this pair to continue profiting from staking rewards on both networks powered by Lido, whereas the ETH portion of which would in the originally suggested pool not have that benefit. If we are to use wstETH, we have to establish liquidity for a new asset, for which there is not yet existing supply/demand on Raydium. In addition, Raydium does not cross-incentivize pools while Orca (the only other AMM on Solana that supports non-stable pairs) does. Orca also has seen tremendous growth in TVL, has a skilled and experienced team, and recently raised a $18m round from notable investors including Polychain, Placeholder, and 3AC, which we believe gives reason to believe that Orca will be a core protocol for decentralized exchange on Solana, which makes us believe Lido should have an interest to liquidity there. By establishing a cross-incentivized (double dip) pool on Orca, LPs of the stSOL/wstETH pair would stand to receive an additional 35,000+ ORCA (~$650k at the time of writing) for the duration of the LDO incentivization (initially proposed for 60 days).

2 Likes
14

Thank you for the update @FelixLts.

For those who may lack the experience of doing so - would you mind providing a brief synopsis on the process of: either wrapping stETH or obtaining it, and then using wormhole to transfer to Solana.

I’m sure that would help many who would like to participate in that Orca pool but may be hesitant to do so because they’re unsure of how.

15

Yes, great idea! We will have a detailed guide on that. On a high level:

  • wrap stETH and receive wstETH (Wrap | Lido)
  • send wstETH through Wormhole to Solana (Wormhole Token Bridge - requires Solana wallet).
  • (if you don’t have stSOL already, deposit SOL and mint stSOL via solana.lido.fi)
  • deposit stSOL/wstETH liquidity on Orca and stake the LP tokens to receive ORCA+LDO rewards
1 Like
16

hi, thanks for all the info. I have the LP stSOL / SOL in mercurial and it pays me in mercurial and wLDO. I have two questions 1) Is he still paying me 7% in lido for the sol stake? even though i’m using stSOL on the aforementioned LP? 2) where can I change the wLDO?

17

Hi, answer for 1) is yes and for 2) there is a wLDO/stSOL pool on Orca