[reWARDS] April '22 Budget + Q1 update

Apr Budget Post

Welcome to the April budget.

The past month saw a huge spike in growth for both stETH and stSOL.

We are continuing to optimize distribution and rewards allocation for stSOL.

stMATIC will be entering the next phase of launch which will bring new integrations and reWARDS planning.

This post will be broken into a few sections detailed below and will be open for community feedback for 3 days (72 hours). After which, if there is no contention, will be acted upon.

Updates for each month will be provided in the corresponding monthly threads.

The sections are as follows:

  • Operational updates
  • Budget and breakdown
  • Reasoning
  • New experiments
  • Operational Goals

Bonus

  • Q1 Update
  • Q1 Outro

Operational Updates

No major operational updates.

Budget and Breakdown

The March budget calls for 4,500,000LDO.

4,325,000LDO distributed across the following pools and networks with the remaining held for unaccounted needs during the month.

The colors correspond to an increase or decrease of LDO for the month. Blue indicates a test incentive.

The spend was lower than budgeted by ~200K LDO due to delayed launch of incentives on Balancer (Polygon), delayed launch for Zeta, and Orca (BTC, ETH and SOL pools). Atrix will be launched this week and was delayed due to operational bandwidth.

An easier to view PDF is provided:

Rewards Budget - Pairs 36769.pdf

Reasoning and Analysis

With the recent price appreciation of LDO we are tapering back incentives while monitoring efficacy.

Solana

The past month has seen solid growth for stSOL of ~60%.

We are working to update the Solana dashboards and migrate to the new dune data sets.

Notable changes

  • Adding new exotic pairs (BTC, ETH). This was a slower launch than expected. Orca is still launching their concentrated liquidity pools which is when we will launch the BTC, ETH pools there. We were able to launch them on Aldrin and Raydium but those also took a bit longer and did not get a full month of data.
  • We are still in a holding pattern for Jet. Ribbon, Mango Markets and Synthetify are integration targets.
  • Francium asked to test incentives for a month.

Tuning is still ongoing. TVL is still rapidly growing and gaps are still getting filled. We expect the coming months to focus on optimization.

Ethereum

Ethereum had a rapid growth period this month. Pools have held mostly steady from a performance perspective. We are stepping up bribes on the curve pools while capital efficiency is higher as well as looking at new opportunities to test bribes.

Notable changes

  • Balancer is launching veBAL so we will be testing 33% (100K LDO) of the normal rewards as bribes instead this month.
  • We have further cut back on Curve emmissions by another 500K LDO while increasing bribes by 250K LDO.
  • Curve dashboard

Terra

  • Astropool has captured a great amount of TVL for stLUNA and less so for stETH & stSOL due to not being the native asset, which is to be expected.
  • Mars protocol is getting ready for launch new assets and should increase demand for stLUNA
  • Astroport Dashboard

Kusama (KSM)

stKSM has been steadily growing. We are working on operational process to get an oracle price feed to allow deeper integrations in DeFi.

Polygon (MATIC)

stMATIC is getting ready for a broader roll out this month. We will also be launching a few new pools as we continue opening up the launch.

New Experiments

  • ETH - Tempus Finance (was delayed from March): We are exploring a way to incentivize long term holders of the fixed income product. This if successful allows Lido to incentivize 2nd order actions instead of simply providing liquidity.
  • Index Coop’s IceTH (3X Leverage using stETH + Aave) will have some incentives tested out this month.
  • Galleon’s ETHMaxy (3X Leverage using stETH + Aave) will have some incentives tested out this month as well.

Operational Goals

The goal is to now focus on increasing natural trading volume over the coming quarter while lowering net LDO emissions from the treasury for mature networks (ETH/SOL) and rotating increased spend to newer networks. While maintaining the peg is our #1 priority we are becoming more mindful of treasury management and focusing on more sustainable defi behaviors.

To that end we are exploring additional pools around stablecoins where a lot of activity naturally occurs.

Q1 2022 Update

To date the reWARDS committee has been operational for 3 months.

In that time we have been able to stand up a hub and spoke model for management across chains, increase coverage of defi (especially for stSOL) while expanding to new networks. The original and continued goal of the committee is to obtain maximal liquidity on an optimal per dollar cost basis while reducing spend. This boils down to measuring against utilization (approx TVL over Volume).

Since inception in mid December the committee has helped oversee the following:

stETH has increased from a supply of 1.6M to 2.9M

stETH incentives have decreased from 3.975M LDO to 3.345M LDO planned for April

  • 15% reduction in rewards with ~80% increase in AUM
  • Curve pool has grown from 620K stETH to 778K stETH with a more even distribution between stETH and ETH

stSOL has increased from a supply of 690K to 3.2M

stSOL incentives have increased from 400K LDO per month (Dec) to a peak of 815K in March and a planned reduction to 625K LDO for April.

  • 2x rewards at peak with 4x increase in AUM
  • Rewards will be reduced 30% this month along with a few missing integrations for gap filling

As the defi ecosystems continue to evolve on the other networks we will continue to watch on areas to provide incentives and tune the growth.

Q1 Outro

I personally am very happy with the progress that has been made to date. That being said, a few areas for improvement we will explore in Q2 are below:

  • Better management of launches with partners on new networks. This has proven difficult to scale and requires additional process. The complexity is only going to increase over time.
  • Continued reduction of ETH emissions. With lending protocols and money markets proving to be a key value driver for stETH, the need for direct emissions is reduced. ETH rewards are still by far Lido’s largest cost center and also our top priority of holding the stETH peg. With Balancer launching veBAL + bribes along with our planned L2 expansions I think there is still room to tighten here.
  • Better capital efficiency. With a lot of new protocols launching bribe / ve mechanics it will be prudent for Lido and the reWARDS committee to evaluate them and move quickly to take advantage before arbitrage removes the benefits.
  • Change management. There is risk of misaligned incentives having myself as the head of both the reWARDS committee and Business Development regarding OKRs and other key metrics. This coming quarter I will be looking to step back as the head of the committee in order to remove any doubt of possible conflicts in the long term.
12 Likes

Shout-out for Jacob for spearheading the reWARDS initiative! Coordinating the planning & ops around that many pools & programs is a major undertaking, and I should say that it has put a lot of a processes in place.

4 Likes

As both reWARDS & LEGO member, I’ve got a request for the community. If you feel like researching the ways Lido can increase its rewards capital efficiency, or would want to test yourself as DAO contributor — I would love to set up grants for those.

And, as usual, the budget docs we’re publishing are open for community feedback — please, share yours!

2 Likes

Hey Kadmil, I have a background in data science and statistics and would love to contribute to the DAO. How should I proceed with setting up a project / grant?

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I think that the comprehensive framework for incentive allocation is a very valuable goal. May start with Ethereum reward programs first.

What we want to optimize for:

  1. Spend less, long-term & right now.

  2. Retain pools TVL so that it’s enough for 1) low-slippage natural trading activity (need to define that one beforehand); 2) potential liquidations on MM (w)stETH is listed on.

  3. Get higher liquidity utilisation on stETH pools — what pairs should be, what amount of liq we need there, what trading amounts are expected.

  4. Understand how the bribes (curve bribes, votium, veBAL) can be leveraged to spend less, what effect those would have short- & med-term, as well as to prepare the model for necessary allocation calculations.

I’d love to get a short pitch for one or all of those things, how long the research is expected to take & what the budget would be. Pinged other reWARDS members who may have separate requests =)

4 Likes

April budget update #1

Due to a steady LDO token price growth over the past month, as well as a recent pool TVL increase, the reWARDS Committee proposes to further reduce direct Curve stETH<>ETH pool incentives by 250k LDO for the upcoming 30 days rewards period starting on April 10th.
Please check the Curve dashboard for more details on pool performance.

2 Likes

@timh Please check out RFP Incentive Optimization

2 Likes

April budget update #2

Due to Balancer updating its rewards distribution mechanics and also introducing bribing mechanics, some tweaks are required on the Lido’s side. To keep rewards uninterrupted, the reWARDS Committee decided to postpone joining Balancer bribing till early May, so the April budget for Balancer will be sent to direct pool incentives. This change will not result in any extra expenses for the DAO.
Besides, there will be a minor change in operations: instead of sending the rewards (via Easy Track) to the dedicated rewards manager contract by Lido, the assets will first get easy-tracked to the reWARDS Committee safe and then transferred to Balancer’s Liquidity mining distribution safe mentioned in the proposal. Balancer team will kindly help us with rewards distribution until we finish our dev work around the process.
The exact amount of incentives to be transferred is 82,142.8571428571 LDO, it will cover the rewards till May 5th.

New Crema protocol was launched on 22th of April with pool stSOL-SOL
5000 LDO are planned as rewards for 30 days period.
We budgeted 3000LDO for April (until 6th of May)

Need to send 20 000LDO to Raydium on April.
The amount was changed as we changed schedule for top-up and plan next refill 6/7.

Solend we agreed to top-up additional 70K LDO for April. So totally we keep the same 120K as in March.

Since the Votium rounds happen bi-weekly, the upcoming round on April 28th starts shortly before the next month and the next budgeted period starts.
To continue the Curve ETH<>stETH pool rewards, the reWARDS Committee will allocate another 500k LDO for the Votium round before the next month technically starts. This will be reflected in the upcoming May rewards budget accordingly.
As usual, the assets will be allocated via the Easy Track.

2 Likes

4 new Orca SOL pools launched on 26th of April. These are new concentrated liquidity pools (Uni V3) style and they have new addresses.
stSOL-USDC
stSOL-SOL
stSOL-wUST
stSOL-USDT