Proposal: Curated Module Fee Changes

[stefa2k]

Hi @kimonsh !

Thanks for going through my post, I appreciate receiving an answer. I’m reviewing the proposal from a more neutral point of view with Lido DAO prospect in mind and making suggestions in this post. I try not to iterate points I already made in my first reply to this proposal. I also omit CMv2 and focus on CMv1.

I’m not against lowering fees altogether. I’m questioning the process as well as the proposal (missing details, scoring process, introduction of bureaucracy, intransparency, missing risk assessment, ROI) itself. To make it shorter and quicker to read I’ll keep it focused and direct. Please take no offense in my writing.

RockLogic related

@KimonSh

all Curated Node Operators have been invited to set up a call with Lido DAO contributors to discuss both CMv1 & CMv2 changes, a booking link was sent to your specific Node Operator chat

In our chat it was only CMv2 mentioned. Thanks again for responding so rapidly to my call request and answering my questions (I understand the need to time cap this), it was very insightful and cleared a lot of things up! I don’t have a fully detailed picture yet though, but it seems I can work on a path for RockLogic moving forward.

The committee rating the applications are not aware of details about participation in Lido’s different activities. I was not aware of this, I think this should have been stated clearly. I left out a couple of things in our application. This wouldn’t have made a difference as far as I’m aware – but is another example of lack of transparency about this process.

Evaluation of the proposal

Lowering fees for everyone while deploying staff to define arbitrary rules and criteria to encourage specific behaviors mirrors the approach often seen in many governments of developed countries. The effectiveness of such incentive systems is questionable and, in some cases, outright harmful. Inevitably, some groups that would benefit are left out, while others receive support despite already being sufficiently incentivized by other means.

Creating and maintaining these incentive schemes carries a significant cost: employing bureaucrats to design programs, draft application processes and guidelines, assist applicants, review submissions, make recommendations, and oversee implementation only for the cycle to begin again. The proposed initiative within the Lido DAO would introduce yet another layer of bureaucracy following this same pattern.

Lido should continue paying transparently for services instead of coming up with complex and complicated incentive schemes for a small group of people.

Scoring

I found little information on how the scoring for Extra Tier works, luckily @kimonsh and @Aleksandra_G were helpful in explaining. Because the proposal doesn’t explain this, please take this with a grain of salt, this is my understanding:

• There are 5 spots on the Extra Tier, so curated set operators compete with each other to get into these. Scoring is relative to competition.

• A committee is rating different topics of engagement with Lido.

  • Who’s the committee?

• There are 3 priorities with different topics:

  • Top priority: high Lido core/stVault inflows (with former being valued higher), governance (holding substantial amount of LDO, delegation is enough; proposal reviews are not highly valued)

  • Mid priority: Infrastructure setup (cloud less value than bare-metal), decentralization (geolocation), client diversification

  • Low priority: Ecosystem engagement, participation of Lido tests (e.g. Primev), public goods, open source (except clients, they got their own Tier), testing

• Performance is not an indicator of evaluation

• Weighting is unclear and wasn’t disclosed to me.

• Because of the selection of top priorities, it is impossible to get into Extra Tier without bringing in substantial amounts of ETH to Lido core/stVaults as well holding substantial amount of LDO.

• No exact values of “substantial amount” can be given because of the relative ranking to competitors.

• There is no negative scoring (e.g. for slashings)

• There is no objectivity in valuing public goods, no KPIs

• There is no check or criterion that verifies whether a “Client Team” is overfunded; that is, whether Lido’s additional spending through a higher fee share benefits Research & Development.

Risk assessment

It was mentioned that most of NO had communications about CMv1 with Lido NOM.

• What were their concerns?

• What was their positive feedback?

• Are there patterns in their feedback to CMv1?

What are the risks for Lido and how would you handle them or just accept them? (non-exhaustive list)

• Distortion of competition

• Manipulative behavior

• Competition instead of collaboration

• Passionate entities becoming drones chasing incentives

• Impact on morale/resentment

• Rising cost of bureaucracy

• Deadweight effect (entities would have done the same thing without incentives, thus making incentives highly inefficient)

What are the risks of first lowering some entities’ fees and then potentially pushing them up again (next evaluation; CMv2)?

Financials

The proposal as well as the initial thread run an example for a NO with current stats.

• What is the expected savings for Lido (ETH)?

• How does this affect treasury (+ timeframes)?

• How does this affect 2025 & 2026 yearly numbers? (profit/loss)

• How come it’s 4,5%, 4% and 3,5%? What made you end up with these numbers?

• Are there credible sources for the 1% to 3% claim as “market conditions” for staking right now?

• How much more does Lido NOM cost because of distribution of top-up fees (from 3,5% to 4% or 4,5%)?

• What’s the cost of the bureaucratic processes/executions?

@KimonSh

As such, it is proposed to adopt the following interim fee structure for the CM for three categories of operators: Standard, Client-Team, Extra Effort.

There are sources claiming different stages (0-1000 keys x, 1001-3000 keys y, etc.), are there key amount stages now in this proposal? This skipped for a flat fee for all keys of an operator, correct?

@KimonSh

This would bolster the DAO’s treasury capacity while ensuring that the DAO can continue to make investment in growth initiatives and efforts to further the decentralization of the protocol.

What projects are planned?

Is this part of treasury dedicated to these causes? (not spendable on e.g. buybacks)

@KimonSh

It is also proposed that, in the event ETH/USD prices drastically fall in a significant and sustained manner, the DAO re-evaluate these proposed terms to ensure Node Operator validator operations related to Lido remains a sustainable business.

What ETH/USD price would that be?

Would this also be the case for decreased key count or a combination of both?

What is the expectancy (hard KPIs: e.g. ETH inflows, gov participation, …) towards NO and their behavioral changes because of this new scoring system? When and how will results be checked and reported?

ROI Extra Tier

The costs needed to get into Extra Tier are not even close to the rewards gained by it from the point of view of a NO. This heightens the risk of deadweight effect. I’ll try to run some examples, please keep in mind I’m not aware of all the factors, pretty sure I missed something or got something wrong.

Additional income for Extra Tier in comparison to Standard Tier:

• 0,5 % equaling around ETH 30 (~ EUR 81k) per year

• 0,5 % equaling around ETH 10 (~ EUR 27k) for 4 months – timeframe until CMv2 could come live

I left out Restaking because it got extra fees (stETH minting fee, etc.) and risks, making it difficult to predict outcomes.

“Pretty sure Extra Tier”

Costs (total ~ EUR 200k):

• LDO purchase of 250k: EUR 165k

• ETH 50k into stVault:

• 1 % stVault fee: ETH 13,5 (~ EUR 36450)

• business development costs: vary

Break even heavy LDO – I’d assume not Extra Tier

Costs (total ~ EUR 81k):

• LDO purchase of 123k: EUR 81k

Break even heavy stVault – I’d assume not Extra Tier

Costs (total ~ EUR 81k):

• ETH 111k into stVault:

• 1 % stVault fee for 1y: ETH 30 (~ EUR 81k)

• business development costs: not included

Governance

What you’re suggesting is a preferred NO led DAO, with more incentives for NO to participate in governance than other collaborators. I’d assume there are reasons why you’d prefer to make NOs participate in governance rather than other (neutral) parties?

I’d expect a strong tendency of NOs in governance to push towards deadweight effects.

General

These kinds of “trust me” proposals are far too common in DAOs and I’ve never understood why they’re tolerated. Lido manages an enormous amount of stake, yet token holders are being asked to approve what appears to be a USD 8m annual budget change, roughly 10 % of the total, based on a four-page document that fails to outline concrete costs, risks, or expected financial impact.

This isn’t a minor adjustment; it’s a major structural change. Decisions of this scale demand transparent, data-backed evaluation. Every voter should know exactly what they’re committing to. Anything less undermines accountability and responsible governance.

Suggestions

I’m critical of if, how and how much the Extra Tier would benefit Lido or Ethereum as a whole and the state/form of the proposal.

Suggestions for improving this proposal:

• Add a voting option for “Yes, without Extra Tier” to allow for more nuanced voting.

• Provide a comprehensive risk assessment, particularly addressing potential deadweight effects and competitive implications.

• Fully outline all projected costs and expected gains, so voters can evaluate the trade-offs transparently.

• Discuss alternative mechanisms to encourage NOs to acquire and hold LDO, for example, discounts with lock periods or other long-term alignment incentives.

• Instead of adding bureaucratic layers, lower fees or fund implementation grants, audits, or support programs for stVault + stETH integrations to make stVaults more appealing organically.

These steps would not only increase transparency and accountability but also avoid introducing unnecessary bureaucracy into the DAO’s operations.