Amid the rise of contention inside the Lido community and Solv team, we have re-explored the potential financing manners aiming of minimizing the cost and risk based on Lido’s financial condition and deeper needs. Lido in the spotlight of the space generates 9,125 ETH annually, well beyond the unusual boundaries of vibrant crypto projects. The endorsement from notable investors, vast prospects for development, coupled with myriad LDO and ETH, which are the most favorable tokens, hint at creditworthiness.
Therefore on the heels of comprehensive consideration, we are poised on issuing credit loan with future cash flow serving as assurance and LDO as interest expense, which reduces the pressure of future repayment in stable coin and opportunity cost of the holding ETH.
*If the revenue or the price of ETH falls sharply, margin (collateral) call would be necessary.
Our team sums up the details with the following embeded messages：
Highlights (TBD)
Amount to Issue: $5 Million
Duration: 6 Months
Maturity to Expiry Date: 7/15/2022 - 1/15/2023
APR: 6%
Payment Currency: LDO (last 7 days TWAP) for interest cost plus stable coins for principal
Collateral*: Lido’s future cash flow as repayment guarantee
In general, the clear cut advantages of this proposal, aside from treasury diversification, will be,
- Future cash flow could be served as collateral to mitigate the opportunity cost of the holding ETH
- Debt repayment pressure is decreased upon the expiry date, as sufficient LDO could be served as interest expense
- Liquidation is on the slim chance given the generous grace period and stable cash flow of Lido, though liquidation risk exists
*A number of partners and investors have reached out to Solv and expressed strong willingness to purchase the bond.
More on Credit Loan
In the past, mortgage loans saw the most financing activities in the space due to the lack of the credit system. The source of funding is not accessible for many projects because of the limitation of effective mortgage assets in the treasury, resulting in underquoting their tokens for survival and negatively impacting the market size at large. Whereas, credit debt serves as a financial pillar for the growth of traditional businesses.
A glimpse of the traditional market reveals a crucial aspect that the Credit Debt is of the utmost importance in committing to a mature financial system. If this proposal proceeds, it will be the first credit bond issued by the DeFi project, signaling crypto projects are as capable of utilizing future revenue and reputation to raise funds as traditional enterprises.
Credit debt has a bright future moving forward, and we believe Lido doesn’t need to be a witness but man-in-middle.