Proposal #16 - Retroactive airdrop 0.5% LDO to early stETH users

[jules-jules]

Hey everyone,

Great to see that the recent signal vote on developing a retroactive airdrop proposal was successful!

Aragon

The proposed numbers:

• Retroactive airdrop of 0.5% LDO to early stETH users
• Use 11543333 as a cutoff block

Just a couple of thoughts, from a community member’s point of view, that I think might be useful to consider.

1. Those who took the risk of staking early on, should be rewarded proportionally. This could be some kind of function of deposit time after genesis and amount staked.

2. Many 0 eth deposits were done, I presume for the sole purpose of benefiting from a potential airdrop. This should not be rewarded. Instead, there could be a minimum threshold in order to be eligible for the airdrop, perhaps 0.5 eth deposited. Higher deposits should be rewarded accordingly.

3. If not included in this proposal, it might be good to consider a separate proposal rewarding LPs given their role in the functioning of the Lido ecosystem.

Interested to hear thoughts on what could be a maximally inclusive and fair way of implementing such a proposal.

[banteg]

I think it would be interesting to take time into account.
So e.g. 1 stETH which has been there from the deployment block till the snapshot block is weighted as 1, but 1 stETH which has been there for half of the time is weighted as 0.5.

[darkside]

I agree with @banteg RE: time-weighting.

The aims of the DAO with LDO distribution must be to:

1. Distribute LDO fairly and widely
2. Maximise growth of stETH

It seems like a purely retroactive airdrop of LDO with a block already in the past probably is not the best way of achieving 2.

If using the time weighting, it could make sense to choose a snapshot block in the future. This will incentivise new ETH holders to deposit in order to receive LDO, but will still mean that past depositors who took greater risk receive a higher weighting of LDO.

A snapshot block in the future could lead to faster growth and adoption of stETH.

[Jerome_Morrow]

I don’t think that time-weighted distribution makes sense because Lido is live like 2 weeks? What’s the difference have you deposited on day 1 or day 7?

The same with deposit amounts – many users try with small numbers before making a significant deposit. Wash trading just to get airdrop is easy to do with big volume as well.

There is no way to do it fairly for all the interested parties. I suggest to make it even for all interactions and focus more on incentives for ETH/stETH liquidity pools. Even if doing weighted, the highest weight should be provided just for simple interaction and small portion for high stakes.

Proposal:

• 10 USD threshold
• 80% of reward absolute amount just for the fact of making a deposit
• 10% time-weighted
• 10% – amount-weighted

[sandrofski]

I agree that time-weighted seems a bit harsh taking into account that the protocol has been live for less than a month.

I believe as well that one should introduce a threshold for rewards (to prevent gamification like on 1inch where someone could easily bot multiple addresses with web3js or similar, which happened).

Then, and similar to Uniswap and 1inch, most of the rewards should go to liquidity providers, particularly on the ETH/stETH Uniswap pool, as that’s what provides exit liquidity for everyone and that allows for stETH to be truly liquid as it’s intended to (and until it’s accepted on a lending protocol). Personally, when I first deposited, the first thing I checked was if I could exit stETH -> ETH, and only after checking that there was some liquidity I decided to move forward, so LPs should absolutely get the lion’s share in the rewards imo.

Therefore, I do believe that LP providers should have a larger weight in the rewards than just staking, due to them taking most of the risk, and locking up ETH which could otherwise have been staked for more stETH.

[culgin]

Agree that distribution should be fair and wide. It should reach as many addresses as possible to create awareness for the project

[mamedai]

I think it is preferable to set some kind of threshold, but not to consider excessive amounts of money or time weighting beyond that.

The purpose of Airdrop is to bootstrap governance.
If we consider the amount, the majority of Airdrop will go to whales. This is undesirable for governance.

The acceptable amount of risk depends on the person. And there is no way to find out.

The threshold of the amount can be any amount.
10$ , or 1eth would be appropriate.

Equal distribution to those who cross that threshold.
(include use tx and already sold address)

[jules-jules]

I think there’s also a larger question of whether to group LPs and stETH depositors within the same proposal, and if so how to weigh allocations based on risk taken, or whether to create an altogether separate proposal solely dedicated to rewarding LPs. The original proposal talks about early stETH users, so there is some ambiguity.

[Frankay]

Agreed, being an early stETH adopter and also a Uniswap LP provider i’d like some clarity whichever way this falls.

[jules-jules]

In agreement with both a time-weighing function and a future airdrop cutoff date to facilitate ecosystem growth - also seeing the number of stETH users prior to the proposed cutoff block somewhat low. How to maximally reward honest users and bootstrap DAO governance while discouraging gamification of the system?

Assuming LPs and stETH depositors are grouped together in the same proposal, LPs and long-term stETH stakers should get the lion share of the airdrop, based on the relative higher risk they have taken.

FWIW, some rough ideas and numbers based off of that:

• 50/50 allocation between ETH/stETH Uniswap LPs and stETH stakers.

• LDO allocation across stETH users could be a function of deposit time after genesis, time staked, and amount staked. 25% of LDO distributed across week 1 depositors; 25% across month 1; and 50% across months 2-6.

• LDO allocations would be calculated and claimable following the cutoff block 6 months after genesis. Similar to the TORN airdrop, allocations would need to be claimed, and if not redeemed by a certain date then the unclaimed LDO would get returned to the DAO treasury for future use.

[mamedai]

I think LPs should be rewarded, but also think the rules for Airdrop should be simpler.

Here is my idea.

1. 0.5% will be distributed to who make the transaction to mint stETH.
2. Set the threshold value. (of course exclude 0eth tx)
3. LP pool of stETH/ETH will be treated as a separate discussion, and rewards will be issued in the future.
4. When Curve launches, LP rewards will move to it.

[jimjams]

while i think that something should be done about zero eth deposits since these are obviously just trying to game the system for airdrops i dont think a high threshold or any for that matter would be good in the long run since the point of the airdrop is to help bootstrap governance.

I also dont think we should make a comparison with one inch since their platform was nearly one year old while ours has been active for less then 2 weeks and the nature of staking is inherently more risky than trading especially as there could still be plenty of issues that could come up with ETH 2.0.

In this regard a time weight based on how long people have held their stake seems to be the best option rather than a minimum stake threshold since this allows for a fair distribution while at the same time not favoring whales.
As for liquidity providers i think a separate proposal would probably be ideal

[ethx]

The idea of taking in account IN and HOLD time for the airdrop to kick the governance is great. However I would suggest to have a max cap for the airdrop to have a more distributed airdrop and so initial governance.

I understand that big depositor are vital for lido.fi and someone may say that having a max cap disincentive big deposit. Well this isn’t the case since this information is given after not before, same as minimum deposit required.

If the goal of this airdrop isn’t only about rewarding but kickstarting the governance this is something to think about.

To make it short:

IN - regard when one took the risk and deposited,
HOLD - regard how long one maintained the position,
AMOUNT - regard how much ETH one deposited,
LP - regard if and how much liquidity one provided for stETH-ETH,

and

DISTRIBUITED - based on the criteria above see the distribution output and find a balance by “equalising” so we do not end with less than 5 address having +95% of the 0.5% initial governance airdrop. Having a Max CAP could help on this.

Sure is fair for those who deposited more to have more but is the voice of someone that deposited 1k ETH worth 1000% more than one with a 100 ETH deposit?

I think this is vital for initial governance distribution, reward in a balanced way to have a wide distribuite governance. Let me know what you all think.

[Storino]

Agree that a purely retroactive airdrop with a past block cutoff 10 days from start is not ideal for the entire 0.5%. This mostly rewards high risk aping into new contracts and does not necessarily benefit the protocol. The high quality team behind this project will easily attract capital over the long term. Rewards should be given for long term commitment and incentivizing the pools that will make the token liquid. Liquidity will be the most important factor in growing the protocol.

[jules-jules]

@ethx

so we do not end with less than 5 address having +95% of the 0.5% initial governance airdrop

Is this realistic? I haven’t done a distribution analysis but from a cursory look at least, it looks like the highest deposits were in the 500eth range for the first week or so.

But I agree that a max cap makes sense from a governance perspective.

[jules-jules]

@jimjams

In this regard a time weight based on how long people have held their stake seems to be the best option rather than a minimum stake threshold since this allows for a fair distribution while at the same time not favoring whales.

I agree. Having a low min threshold and max cap would probably allow for a more equitable distribution. And then rewarding time and length staked after genesis proportionally.

@jimjams

As for liquidity providers i think a separate proposal would probably be ideal

I tend to agree because the parameters are so different, and LPs should be rewarded accordingly.

[OMG]

just some thoughts:
i think the goals are rather clear

• no airdrop farming
• still maximum of reach
• dont empower “whales” too much

i think its a good idea to not have a past block for the airdrop, but if the reqs are clear, a future block is exploitable by farmers.
some ideas:

• take 50% (0,25%) now, 50% for a second airdrop with a future block
• extend block to either vote #16 creation or vote #16 passed to include more users (of course again eliminating 0ETH / 0,0001 ETH etc.)
• assuming that the deposits will follow normal distribution use something like 2 standard deviations as a cut for participants. obviously the closer we will get to the final block, the easier it will be to farm, but that should allow a definition upfront (= fair for everyone) without being to exploitable.

at the same time i think that e.g. UNI, badger etc. were so successful because the reqs were unclear. so if there was a second airdrop in the future i wouldnt define it publicly upfront, but rather surprise people.

[vsh]

A few thoughts of mine on that whole thing.

I think that airdrop is needed for early stakers:

• they took significant smart contract risk and price risk, compared to later stakers
• are getting less staking rewards annualized than later stakers, due to how rewards are socialized between all stETH holders
• provide a significant service to Lido by locking ETH with us and providing liquidity for staked eth.

I think that 0.5% airdrop is on a high side of what’s fair for these risks, and the cutoff point is arbitrary (I’d prefer it to be till the day Lido starts incentivizing stETH LP), but the Dao has voted on these numbers, so let’s roll with it.

Now, if I were to weight the rewardable things people did for Lido, I’d weight them like that:

• Staking with Lido: 1 point for every ETH staked - increasing Eth amount under stake is good for Lido and risky for stakers
• Providing liquidity: 2 points for every stETH on LP (1 for stETH side and 1 for ETH side) per month (so 1/15 of point per day) - people are taking IL risk along with staking risks for this one, so it’s significant, and more stETH liquidity is good for Lido
• Holding stETH without providing liquidity: 0.5 points per month per ETH
• Selling stETH on uniswap: -0.5 points per ETH - exiting your stETH position almost immediately doesn’t really color people as early supporters of Lido, does it?

The other thing about this airdrop is that a pretty good strategy for airdrop recipients will be to receive the airdrop, wait until stETH/ETH liquidity is incentivized, and exit all Lido-related positions immediately. I don’t think they will do that - it took significant trust to lock Eth with Lido this early and I believe they will maintain their positions. But it’s better if that is reinforced by the expectations of additional reward for those who will continue to support Lido in the future.

Thus, I propose for 0.4% to be distributed using the point system introduced earlier in the post, and 0,1% left to be distributed in 6 months from now to the same set of recipients on similar merits - so only the ones who hold and/or LP will be able to collect it.

[cs70]

Some of your suggestions is so complex. ait will take weeks to implement.

Anyone who deposited anyhow should have a floor amount of Token, rest could be a mix of days and Value.

Airdrop Hunting, nobody can exclude people just because they did the system on low scale before investing more.

[vsh]

I’m pretty sure I can make the airdrop dataset using points system in a day.