The Current Situation – stETH deep liquidity is important but Lido’s current incentives can only last 4 years. Lido’s key value proposition is the readily available on-chain liquidity on stETH that it provides. However, LDO currently spends ~4.5mn LDO (~$6.3mn) in emissions monthly /54mn LDO ($75.6mn) in emissions annually to sustain these liquidity pools. While it is paramount that LDO maintains its core value proposition of having deep on-chain liquidity venues for stETH, it needs to work towards a sustainable solution for its stETH on-chain liquidity. LDO treasury only has ~$260mn (mostly LDO with some stETH, DAI and ETH) which means at the current run rate, it would last less than 4 years before running out of incentives.
Deep liquidity is only a must pre-withdrawals, there’s no need to budget for years of liquidity rewards. Once withdrawals are enabled, LDO emissions should be redirected to other initiatives.