Proposal: Continue Curve stETH LDO liquidity scheme

Proposal: Continue Curve stETH LDO liquidity scheme for 12 months / vote on the quantity of LDO to be distributed on a monthly basis.

(In collaboration with Krasmussen)

This proposal is based on the initial “Incentivizing Curve stETH liquidity with LDO" proposal.

Overview

This proposal covers the implementation of LDO rewards for Curve stETH liquidity providers that stake in the Curve liquidity gauge.

stETH holders who add stETH/ETH liquidity to Curve - in addition to making use of the Curve liquidity gauge - are rewarded with LDO emissions.

Problem

Unstaking ETH is currently unavailable and additional Curve pool incentives will make stETH/ETH more liquid as well as stable in peg.

There’s a need to incentivize stETH/liquidity to maintain a 1:1 exchange rate and to allow the seamless transfer between the two assets.

Proposal

Between Jan 12 - Feb 12, stETH liquidity providers on Curve are rewarded with 0.5% of total LDO supply as incentive.

This works to incentivize liquidity provision across Curve which in turn contributes to a 1:1 peg between stETH and ETH, effectively allowing users to unstake their ETH through the liquidity pool.

I suggest a continuation of this moving forwards - 0.5% of LDO supply for the coming 30 day period - with future amounts to be voted on on a monthly basis.

Discussion

Points of interest:

  • When should the LDO amount be voted on?
  • Should there be a max/min LDO amount to distribute each month?
19 Likes

Great idea.
Since we are still in the early stage, we may also keep balance between predictably and flexibility on the incentive plan. How about adjust the duration to 3 months?

6 Likes

Strongly in favour of this proposal although I would point out that there should probably be a mechanism that specifies a max cap on emissions going to Curve LPs per year. In addition to voting on the amount of LDO to be distributed each month, there could be a vote that specifies a maximun the treasury can disburse during the period of Curve LP incentivization.

4 Likes

I like the idea, although not sure if better to extend a month at a time for 3 months or to directly extend it for 3 months. Either way, I’m in favour.

3 Likes

Anything that can reward investors that are penalized by the low reward rate is good. Cannot say it better than jules-jules.

1 Like

I don’t have strong opinion on month vs. three months option - but I’m going to say that doing it on monthly basis is a bit less work on tech side of things, everything’s ready for that.

Let’s vote that we will have one year incentive and fix the amount of next month rewards. After it let’s start the discussion how much Lido will spend during one year.

I think it can be a risk if the liquidity will be only because of rewards.

1 Like

This is a great idea to ensure liquidity between steth/eth. Without incentive, liquidity will leave the curve pool in the form of eth, hurting farmers / LPs. Without liquidity, the value prop of holding steth diminishes greatly.

Hope to see this pass!

2 Likes

I’m providing Liq currently.
Made the effort to stake my ETH via lido app before adding to the pool to help keep the pool balanced.
The LDO rewards were enough to entice me to up my staked amount after a weeks trial run.
Will happily continue to provide Liq if the incentives remain.
Would certainly move my capital out of the pool if the LDO incentive isn’t continued.

6 Likes

Opportunity cost of leaving in the pool without rewards is too high so i would likely reevaluate as well

2 Likes

100% in support. If the peg breaks stETH could be in big trouble. The rewards need to be continued for sure.

1 Like

Strongly support. I believe this is the only place with liqudity for eth/steth?
Right now there is lots of liqudity, pool is well balanced and everything is functioning as it should. Would be shame to ruin it.
With 6 days left of the current program, when will the vote for renewing be started and do we have enough time to renew it without a “gap” in the incentive?
A gap might bring a lot of turbulence of people withdrawing eth and moving elsewhere, thus disbalancing the pool.

1 Like

+1 my biggest concern is that liquidity would dry up without incentive and create imbalance on the curve pool

1 Like

Cliffs are bad. They disrupt the market and damage trust in the underlying. You should adopt a long-term exponentially-decaying rewards scheme, similar to SNX’s.

2 Likes

yes indeed.
There are 4 days left and still no vote started?
Who is supposed to start a vote and how long does voting last?

2 Likes

Definitely supporting this!

1 Like

I strongly support as well. The abrupt end to the LDO rewards without a significant increase in CRV rewards will drive a max exodus from the ETH/stETH pool, which could create a wide variety of issues. Continuing the rewards and developing a plan to gradually reduce the LDO rewards while increasing to the CRV rewards could help to ensure liquidity of the pool, pegging, etc. are not impacted.

1 Like

Seems there’s a snapshot vote for a 1 month extension live here:

https://snapshot.page/#/lido-snapshot.eth/proposal/Qmd1tFviq2hhWrXcvJQUx18YBaVFfT46uVSW1qn2dgsMsk

2 Likes

Just FYI, a new vote to extend the liquidity scheme by one month is now live for voting

https://mainnet.lido.fi/#/lido-dao/0x2e59a20f205bb85a89c53f1936454680651e618e/vote/43