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

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.