tldr
- probably gud eventually in some form but we prefer to wait for dual governance and an ecosystem to form around the staking router
- highest impact is to focus on long-term product things, let the pie grow a bit more first
- dont design for ponzinomics, design for a better protocol
- eg flap/flop auctions, staggered redemption curves, mint/burn on price thresholds, etc ideas welcome
wall of text
Generally we agree with @monet-supply for similar reasons.
- some sort of balancing incentive for LDO holders is probably needed in the long-run
- the current proposal is designed for LDO value extraction maximization rather than balancing the Lido on Ethereum protocol as a whole–we are better off in any case focusing on long-term impact
- It is also likely far too early as it would be nice if we could let the Staking Router ecosystem mature and launch Dual Governance before refocusing
The more governance levers we introduce to the protocol, the further we stray from developing a thin, neutral protocol. The Staking Router and Dual Governance are important steps in the right direction, but a governance-controlled payout is a step in the opposite direction.
Btw we’d go further than that even and suggest that stETH with the Staking Router and Dual Governance could become the pivotal decentralized umbrella liquid staking token to face off against centralized entities, as any decentralized pools of validators could theoretically join stETH through a SR Module. These are developments that are well worth focusing development interest and focus on over the next few months.
In our view it would be better to have an automatic system with no governance input rather than one where governance can control the payout ratio.
Example such systems
Maker flap/flop auctions: In reality, the flop system would likely not work or not work well – in a scenario where stETH is undercapitalized from a giant slashing event that wipes out the surplus, it would likely be very difficult to raise enough ETH through LDO sales at that point and any efforts to sell would make it even harder.
Staggered redemption curves: The clever Gyroscope stablecoin team have other ideas to help bolster the defense of their protocol, such as decreasing redemption curves to slow down a ‘run’ on the assets in the event of a market shock. For stETH it could look something like removing the commitment to 1:1 withdrawals if the protocol surplus goes below a critical threshold level or 0. This could buy time and avoid issuing LDO in an extreme market scenario. This has further benefits by increasing the cost of governance attacks.
Mint/burn on valuation thresholds to bolster and burn the surplus: The other balancing factor that is missing from this proposal is a trigger to issue new LDO when the valuation is appropriately high. The thresholds could be set without oracles, as a function of the Surplus to Token ratio and AMM LDO/ETH prices.
In any case, what we should be solving for is a more perfect protocol, rather than try to introduce narrow tokenomics that we believe will game the price. The constraints that systems like this follow probably look something like:
- Possibility to make threshold levels immutable
- for eg % of totalSupply of stETH or a ratio of surplus to AMM price etc
- Automatic and uncomplicated mechanism with explicit rules understood upfront
- No privilege for token holders ‘in the know’, even-handed equal treatment of all LDO token holders alike
Agree with @monet-supply on needing more capitalization. 6k is arbitrary, quite low (out of date?).
LDO as bonding token
Regarding LDO as a bonding token for Node Operators, we get the gut feeling that this is ‘early bagholder rewarding’ tokenomics that doesn’t actually secure the protocol and ‘endogenous collateral’ shouldn’t be the bonding token in any case.
Other thoughts
A stETH-powered L2 would be great!