[reWARDS] February ‘23 Budget

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Welcome to the February reWARDS budget.

Details are below as usual. This proposal will be open for community feedback for 3 days. After which, if there is no contention, it will be acted upon.

If there are budget updates throughout the month, they will be posted under this topic for transparency.

The sections are as follows:

  • Operational Updates and Topics
  • Budget and breakdown
  • Reasoning
  • New experiments

Operational Updates and Topics:

  • Higher level table of networks’ allocations and a .csv file with the specific pools/integrations by network and platform. reWARDS allocations for stKSM liquidity and integrations on moonriver have been cut in this budget.
  • Public dashboard monitoring Lido’s reWARDS multisigs available here, in the public LidoAnalytical dune. Transactions are labeled to the best of our ability to make it easier for community auditoring.

Budget and Breakdown

The February’23 budget calls for 2,146,320 LDO. (Actual 1,951,200 + 10% buffer)

Remaining balances estimated at EOM (unspent and left in the different multisigs by the last day of January and usable for February’s spend, rounded to thousands):

  • Ethereum: 116,000 LDO
  • Solana: 96,000 LDO
  • Polygon: 9,095 LDO
  • Moonbeam (Polkadot): 0 LDO
  • Moonriver (Kusama): 5,000 LDO
  • Arbitrum: 20,000 LDO
  • Optimism: 20,000 LDO
  • Total: 257,000 LDO

Requested budget 1,890,000 (Budget Call - Remaining, rounded)
(At current prices, this amount has a market price of $4,347,000)

To be distributed across the following pools and networks with the buffer of 195,120 LDO held for unaccounted needs during the month.

The colors correspond to an increase or decrease of LDO for the month.
The detailed .csv file is provided here.

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Reasoning:

Ethereum

The considerations from last month stand for this one with the special consideration that LDO/ETH price has increased which justifies not needing as many LDO budgeted for the same amount of ETH liquidity.
As such, the gradual reduction in incentives has continued in this budget.

Solana

No specific comments.

Polkadot

No specific comments either.

Kusama

This month’s budget proposes to bring down to zero the incentives for stKSM on moonriver. The low tvl and the lack of ecosystem justify this cut which will also serve as a source of data on how the liquidity and integrations of the stAsset perform.

Polygon

No specific comments.

Arbitrum & Optimism

No specific comments.

New Experiments:

The model for balancing changes in incentives across the different chains and stAssets has continued to be used from last month’s budget. The overall reductions on this budget were higher especially to account for the LDO price action so far in 2023. New incentives experiments will be tried in February such as the new protocols that have entered the budget allocations above.

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Just quick update for Polygon budget.

We did not send the 5k planned for Satin during January, so those 5k LDO should also be added to the unspent amount for Polygon January totalling tlat 14095 LDO now.

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Important update: As part of a broader strategy for both reWARDS and Lido on X, there will be a further reduction to zero on the incentives paid out on Moonbeam (for stDOT integrations and liquidity) for February. This is in addition to the already proposed cut on Moonriver (for stKSM) outlined in the original budget above.

This comes as yet another part of the overall incentives reduction that has been taking place since September. Sustaining the runway of the treasury and allocating LDO incentives in a way that drives growth and utility in a cost-effective way should continue to be key things for the reWARDS committee and for the broader Lido community.

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Hi everyone,
Some budget changes for Orca (stSOL): they shut down their standard pools end of January so out of 11,000 LDO sent over only 4,500 LDO got allocated as follows:

stSOL-ETH(CL) 1000
stSOL-SOL(CL) 1500
stSOL-USDC(CL) 1500
stSOL-USDH(CL) 500

The remaining 6,500 are transferred to the next rewards cycle.

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A few thoughts on liquidity incentives and how to track / pay them. The above table shows the actual USD impact of paying for liquidity over the past month. Granted, when the January budget was set, the price of LDO was ~1 USD but it goes to show the futility of using the native token as a ‘payment’ token. We have rewarded LPs an extra 50% in January but it’s not clear that stETH to ETH slippage has decreased by 50% for example.

The approach of cutting until we hit turbulence seems appropriate because it’s anyone’s guess what the lower bound is. It could well be 0 (sure hope it is) given stETH’s level of organic demand and adoption, not to mention the incipient arrival of withdrawals which should provide an arbitrage route to bring the price of stETH closer to ETH organically.

Proposal

  • Going forward, track every line item in USD terms and measure/report effectiveness relative to USD value
  • Enforce a budget setting process that ratchets down the amount of liquidity incentives in USD terms
LDO_{max} = min \left(LDO_{n-1} \times (1-Red_{\%}), \frac{USD_{n-1} \times (1-Red_{\%})}{Price(LDO)} \right)

The idea is that when we set the March budget we commit to the max total budget to be the smaller of the LDO tokens issued in the previous month, or the USD value in LDO tokens (at the new prevailing price).

Would like to see a more aggressive reduction % ≥50% as we are not seeing any meaningful impact on liquidity so far and we will observe the stDOT and stKSM results keenly.

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Reduce DOT and SOL budget to 0 ASAP. Keep ETH, Polygon, L2s, and save the rest.

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Like mentioned in the comment above, DOT’s rewards distribution for February has been cut to zero, so we’re there! SOL’s budget is being reduced alongside the others and already small.

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Hey there,

Not sure it’s really the topic of this discussion, and sorry if it is the case, but just wanted to point out the fact that rewards which are distributed as vote incentives on Hidden Hand to support Lido’s liquidity on Balancer are easily gamable and generally gamed by smart veBAL holders. Lido can lose anywhere up to 20% of the rewards distributed through this channel.
The reason for it: rewards are distributed every two weeks to reward two weekly vote, but there is no guarantee that voters won’t change their vote before the end of the first week.
That being said, I think it would be smart to move towards an onchain solution for Balancer vote incentives.

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Fair point. @carvas is actively engaged with all vote lock protocols to optimize and adjust spend accordingly. The rewards committee is hoping to publish better analytics on the decision making process and how distributions are decided.

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Update to February’s budget:

  • An additional 10k LDO has been allocated to Polygon’s February reWARDS budget, due to the expansion of wstETH to the chain. It will work towards bootstrapping it’s liquidity from scratch on there.
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Also for transparency on Polygon’s February budget:

Due to the shifting market and sudden growth of stake, we made rebalances to accommodate incoming new liquidity.
Allocations are still within the total February budget.

February LDO incentives actual
Balancer-bribe 15000
Balancer Direct 30000
Curve 2500
Beefy 15000
Kyber 40000
Idle Finance 2000
Aave 10000
Tetu 12500
QuickSwap 3000

Changes are already visible on the March budget (in actual columns) however it should be logged here as well for complete transparency towards the community and LPs

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