Propose $10M Bond Issuance for Lido

Before embarking on a debt raising, we would like to open up new possibilities beyond pure debt offering, which we believe is more in the interest of the Lido Community.

Under the downward corrections, there is generally one main decision to be taken into consideration when choosing a financing option, which is diversification. A glimpse of Lido’s treasury balance, stable coins Lido possesses merely match the requirement for future working capital. Nevertheless, our other featured products, Convertible Voucher, can address the ongoing advancement that Lido has committed to, allowing for higher level of diversification and granularity when implementing $10 millions fundraising strategies without the need to pay back in the future.

Once again, we would like to reiterate that Solv is capable of closing the sale fast with the aid of solid relationships with top-tier investors (voucher buyers). We helped a $3 million fundraising for Perpetual Protocol.
https://twitter.com/SolvProtocol/status/1498193156428288002

Introduction of Convertible Voucher

Simply put, the convertible voucher is a structural product, containing a certain amount of collateral tokens. Its unique payment mechanism takes into account the volatility that currently characterized Defi while retaining a strong tolerance of risk. It was featured with parameters including maturity date, settlement price, bond price range, face value, APR, etc. For instance, if the token price falls out of the bond range, the voucher gives buyers access to more or less collateral tokens. Shared below are some of the most promising edges of the product,

  • Convertible voucher allows to place stETH at future price, which appears to be a better choice
  • The spot price of ETH will not be affected, in a way to sustain confidence in Ethereum’s community
  • Convertible voucher eases the downside exposure of ETH so as to enable a widespread adoption
  • Buyers have the complete freedom to split, trade, or transfer the vouchers in a form of NFT on Solv’s platform before the maturity date

*Use Case of Convertible Voucher (Payout Breakdown for the Convertible Voucher | by Solv Protocol Team | Solv Protocol | Medium)

Proposal Details
We propose to issue a $10 million convertible voucher for Lido by our one-stop solution. The voucher is convertible when the settlement price is below $400 or above $1600 (if the settlement price falls within the range, Lido only needs to pay the equal amount of collateral, which is $10 million). In accordance with our discussions with potential investors during the past two days, most of them prefer to accept stETH as collateral assets. Meanwhile, we recommend merging existing ETH into stETH via Curve. 25,000 stETH, give or take, is acquired to deposit upfront as collateral.

Highlights

Amount to issue: $10M
Duration: 6 Months
Zero Coupon APR: 0%
Bond Range: $400 ~ $1600
Settlement Price: 15 Days TWAP
Collateral: 25,000 in stETH
Maturity to Expiry Date: 7/1/2022 ~ 1/1/2023 (TBD)

Example of Convertible Voucher

Settlement Price within the Range of $400 ~ $1600

1.Provided Tyler purchases the convertible voucher issued from Lido for $1,000 USDC. At the expiry date, if the price of ETH is $1200, then 0.8333 stETH (face value ($1000) / settlement price ($1200)) is claimable. Furthermore, the ETH 2.0 gives 4% APR to stETH holders, meaning that Tyler is awarded additional 0.033 ETH. The outright revenue (principal plus interest) is 0.85 ETH, which is $1020 USDC.

*Lido is able to retrieve 16666 stETH (face value ($10M) /settlement price ($1200) - 25,000 stETH), if all is claimed.

Settlement Price below $400

2.Provided Tyler purchases the convertible voucher issued from Lido for $1,000 USDC. At the expiry date, if the price of ETH is $300, then 2.5 stETH (face value ($1000) / lower bound price ($400)) is claimable. Furthermore, the ETH 2.0 gives 4% APR to stETH holders, meaning that Tyler is awarded additional 0.05 ETH. The outright revenue (principal plus interest) is 2.55 ETH, which is $765 USDC.

*Lido is able to retrieve 0 stETH (face value ($10M) / lower bound price ($400) - 25,000 stETH), if all is claimed.

Settlement Price above $1600

3.Provided Tyler purchases the convertible voucher issued from Lido for $1,000 USDC. At the expiry date, if the price of ETH is $2500, then 0.625 stETH (face value ($1000) / upper bound price ($1600)) is claimable. Furthermore, the ETH 2.0 gives 4% APR to st ETH holders, meaning that Tyler is awarded additional 0.0125 ETH. The outright revenue (principal plus interest) is 0.6375 ETH, which is $1594 USDC.

*Lido is able to retrieve 18750 stETH (face value ($10M) /upper bound price ($1600) - 25,000 stETH), if all is claimed.