I think this proposal is alright. stkAAVE style mechanism is generally sound, and considering buyback to acquire the LDO to be distributed to stakers along with staking lockup period, it provides value accrual not just for staked LDO but all LDO holders as a whole.
Do have some general comments though:
- The value of staked tokens as insurance is probably not very high, considering LDO can be expected to fall sharply in the event of a significant slashing event requiring recapitalization beyond insurance fund
- 6k ETH insurance fund doesn’t seem sufficient to have confidence in being able to self insure against small to moderate losses (even excluding large systemic slashing events which are effectively un-hedgeable)
- Lido continues to have significant token denominated operating expenses from liquidity mining for stETH, and I don’t think it makes sense to be making distributions to token holders in a case where the protocol is not actually profitable yet
- Lido has limited development resources which could be better spent on other priorities that grow the protocol rather focusing on distributing existing revenue
So while I think the broad strokes of the proposal are fine, I’d be more comfortable approaching this as a medium term (12-24+ month) goal. Additionally, I think targeting a much higher capitalization/insurance buffer (0.2-1%, ~12,000-60,000 ETH based on current circulation) before distributing earnings makes sense. And this insurance backstop could theoretically be put to use providing liquidity in Curve or Balancer stable LP, which can reduce Lido’s operating costs linked with liquidity mining.
tl;dr: grow the pie before focusing on how to slice it up.
Gonna leave this video here to end on a light hearted note 
“It’s not about how much you earn, it’s about what you’re worth.”
