Lido DAO’s current incentivization program is, in my opinion, inefficient and inaccurate. Here’s why, if anyone dares to look:
1) It doesn’t incentivize governance; it incentivizes development through contributors.
Incentives should be split into two categories: contribution (development) and governance.
Right now, Lido DAO’s program is entirely focused on development incentives.
Governance incentivization, however, should aim to increase decentralization among token holders and encourage delegation. That means the primary incentives should go to delegators, with perhaps a smaller portion going to delegates.
By mainly rewarding delegates with the protocol’s native token, you risk centralizing more power among a few large delegates(many of whom might not even have any personal stake). On top of that, you’re also diluting all token holders’ ownership of the protocol (which ties back to tokenomics).
2) Evaluating delegates is still an unsolved problem.
Objectively and decentrally evaluating delegate value is something no DAO has fully figured out yet, and may not be possible anytime soon.
Current scoring systems are a good first step, but they’re far from being accurate, efficient, or decentralized.
We do have a solid proxy, though: a delegate’s own stake and holding duration.
The more personal stake and long-term commitment someone has, the more likely they genuinely care about the protocol. Of course, voting participation at around 90–100% should be mandatory, given that votes aren’t frequent and assuming delegates have enough knowledge to properly understand the referendums.
Today, Lido DAO’s governance participation sits around 5–6% of the circulating supply. With proper incentives for delegators, that could easily rise to 15–20%.
If the goal is to foster new ideas and innovation, that’s a development incentive.
If the goal is to strengthen governance, increase decentralization, and secure the protocol, then incentives should target delegators.
By the way, a decentralized set of stakeholders and token holders naturally leads to more innovation, transparency and sustainability.
You won’t even need to incentivize things like proposal creation or participation in activities, those behaviors emerge organically when the system is truly decentralized.
That said, I’m not sure most DAOs are willing to go in this direction yet, they’re still relatively centralized in these early stages. Lido DAO has a clear advantage, in my view, it’s more innovative thanks to its optimistic governance feature, EasyTrack. Not every protocol decision needs to go through a major referendum, and that flexibility creates valuable room for greater decentralization among token holders and delegates. I hope Lido DAO uses this opportunity efficiently.
For comparison, DAOs without optimistic governance or similar innovations tend to become more centralized, both in their delegate structures and tokenholder bases, simply because not all decisions can be made in a fully decentralized way. Aave is a good example of that.