TLDR
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LDO should be a way to steer how protocol fees translate into user value, not a claim on cash flows.
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Lock LDO to influence deposit routing and user fee levels. If you want more flow, you lock more. The benefit accrues to users in the form of lower effective fees.
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Give integrators the option to lock LDO to earn credits that reduce the protocol fee for their users. This turns LDO into a tool for price competition rather than a payout instrument.
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Publish a simple quarterly spending and surplus view so we can agree on facts. No witch hunts. Just categories, variances, and a clear surplus policy.
I think this is a low regret path. It aligns LDO with growth and fees right now, stays within the spirit of Lido’s marketplace direction, and avoids the two things that keep getting rejected: buybacks and dividend-like distributions.
Motivation
A lot of people have tried to connect LDO to protocol success. Most of those conversations run into the same concerns. It is too early to distribute, the treasury and safety buffers matter, and turning LDO into an income token creates regulatory and incentive risk. All fair points.
The problem is that the default answer becomes not now, and then the topic stalls. Tokenholder incentives remain weakly coupled to protocol fees, while a large budget continues to be spent with limited public breakdown. That combination is not ideal for a system that aims to be credibly neutral and governance light over time.
The proposal below accepts the no distributions constraint. It tries to align LDO with fees by letting LDO act as a steering right for user pricing and deposit routing. If the protocol grows and fees matter more, the right to steer becomes more valuable. That value is expressed as demand to hold and lock LDO, not as cash paid out.
Core idea 1: Lock to steer routing and user fee levels
Think of the Staking Router as a marketplace of modules that compete on decentralization, performance, and price. The question is how to let the market express preferences without turning LDO into a dividend.
Simple mental model:
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LDO can be locked for voting power that decays over time.
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Votes set weights for how new deposits are routed across eligible modules.
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Modules can precommit a small number of basis points that flow back to users as automatic fee rebates. The rebate is simple and on chain. It cannot be redirected to tokenholders.
If a module or a coalition wants more flow at a given effective price, they can lock LDO and vote. Users get a better price. The module gets flow. The protocol keeps its fee setting as a parameterized surface instead of a monthly governance argument. Importantly, nothing here pays LDO holders. The only beneficiary is the end user through a lower net fee.
This is not perfect. There are capture risks and parameter choices. But it moves the system toward a healthy market dynamic. LDO becomes a tool to compete for users, not a claim on cash.
Core idea 2: Integrator fee credits backed by LDO locks
Integrators matter. Custodians, exchanges, wallets, and DeFi protocols decide what gets front and center for a lot of people. Give these partners a clear path to improve the deal for their users without asking for cash subsidies.
Mechanism sketch:
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Qualified integrators can lock LDO to mint non transferable fee credits.
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Credits lower the protocol fee for their users while the lock remains.
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Credits decay as the lock approaches expiry.
Again, no money flows to LDO holders. The benefit goes to users in the form of a better price. For the integrator this is a clean, measurable way to compete. For the protocol it is a way to translate LDO demand into growth without draining the treasury.
Transparency request: numbers we can all reason about
I do not think anyone is asking for a microscope into every invoice. What is missing is a uniform, quarterly view that lets voters test claims about runway and surplus.
Ask for three simple things:
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A standard quarterly OPEX report. Use a short list of categories, show approved budget vs actual, and highlight large payees over a sensible threshold.
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A surplus policy. Define target runway and safety buffers, then show how fee inflows and spend translate into surplus or deficit.
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A single index post and dashboard that links the budgets, reports, multisig addresses, and relevant threads.
If the answer to distribution questions is not yet, then the threshold for yet should be visible and predictable.
Why this fits the direction Lido has already set
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The Router is naturally a marketplace. Steering that marketplace with vote weighted routing and user price signals is consistent with the product architecture and the long term aim of minimizing ad hoc governance.
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The approach keeps safety first. Slashing coverage stays in hard assets. No endogenous insurance.
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There is no buyback and no revenue share. That reduces legal and regulatory risk and keeps the protocol’s options open.
Implementation sketch
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Introduce time locked LDO with decaying voting power.
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Add periodic votes to set routing weights and to assign user fee rebates that modules have precommitted.
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Add an allowlist and a simple on chain credit system for integrators who lock LDO.
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Start small. Route a minority of new deposits through the system at first, measure, and expand only if it works.
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Publish the first quarterly OPEX report before the pilot expands.
Everything above is a sketch. Precise lock lengths, caps, decay curves, and safety checks are details for a working group and audits. The important part is the direction.
What good looks like after one quarter
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A visible rise in the share of LDO that is locked.
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Measurable user fee improvement relative to baseline.
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Healthy dispersion of routing weights and a clear benefit for modules that invest in decentralization and performance.
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Integrators using credits to compete and bringing new users in.
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An on time OPEX report that the community can read in under ten minutes.
Likely objections and responses
This still creates a governance attack surface.
True, but smaller than the current situation where every fee or incentive discussion becomes bespoke. Start with limits, damping, and a low initial share of flow. Expand as confidence grows.
Why not wait until surplus is large?
Because this does not spend surplus. It sets rules that convert LDO into user value. Waiting delays alignment with no treasury benefit.
Is this just Curve style bribing in disguise?
The key difference is who receives the benefit. Rebates go to users, not to ve voters. That removes a large class of perverse incentives.
Will this favor big players?
There is always some advantage to scale. Counter with lock decay, reasonable caps, conflict of interest disclosures, and public monitoring. If a specific parameter is gamed, adjust it in the next epoch.
Concrete asks for Snapshot
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Approve the design direction where LDO locks govern routing and user fee rebates. No distributions to LDO holders.
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Approve integrator fee credits that require LDO locks and only benefit end users.
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Approve the transparency package and surplus policy, with the first report posted before any expansion beyond the pilot.
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Review metrics after 90 days and decide whether to scale.