Treasury Diversification #2 - Part 2

Proposals
18

I‘ve been following this since creation and i agree and disagree with a lot of argumentations however the proposal does not match my viewpoint especially how its communicated.

The proposal was driven by further decentralisation of the ecosystem. Fundamentally thats a great idea. Indeed.
However:

  1. Lido or more precise LDO is lacking decentralisation in general. Frist time I heard about LDO was when Banteg said „a good fried of him is building a project“. Since then, the distribution of LDO never seems to be equally shared between „closer insider members and the broad mass of people/community“. The wallet structure never changed tremendously. Few wallets control LDO
  2. Keeping this in mind I ask myself, how a further venture capitalist as investor add any specific value to broader decentralisation. In other words, another whale concentrating the LDO token distribution even further.
  3. Beside selling such a big amount of LDO to a VC, the terms and conditions are solely in favour of the buyer. 1 year cliff starting in midst of a bear market will end up in a massive chunk of capital at the next cycle which will further lead to further participant (besides all this giga wallets) looking for a huge amount of exit liquidity. It feels like the intension is towards profitability for dragonfly rather than distribution of a token for more decentralisation and thus stability and diversity. Speaking about cliff, a 4y+ cliff seems to be more appropriate IF this proposal should continue to exist in general.
  4. Since we are in a bear market, the VC can also TWAP buy the token on the open market while LDO holders can decide whether selling to him or holding their tokens to support the projects further decentralisation.
  5. To make it clearer, if the team would support the community rather than a single VC, I would propose selling those tokens to the community e.g. another pre-mine event for stETH holders or a capped amount of tokens via sale in an IDO or similar.
  6. Lastly I would like to cite SBF when he made clear, in crypto, revenue isn’t the metric to focus on - its profitability (of the project, not a VC). Since the overall global economy is tense, having some more tokens in the treasury will help Lido to survive in the next years by selling those treasury tokens on the open market at way higher prices. So selling now will end up in massive opportunity costs for the project and thus the community!

The reason why im against any of these proposals rn is, the crypto market seems to be something which it isn’t: a place where the community (mass of participants) have „equal“ rights to decide the direction and health of a project. This is urgently important since crypto gained an even more shady light since all happenings in the past.

Decentralised autonomous organisation, not centralised organisation.

2 Likes
19

Some interesting points here from @Philadelphia.

I am new on this forum, although some might know me for my involvement at MakerDAO as former proponent of LOVE (Lending Oversight), researcher at dirtroads.substack.com, and advisor at Cherry Ventures. I am an enthusiastic follower of the Lido project and planning to spend more time as part of the community going forward. The opinions below are solely personal and do not represent any other institution beyond myself.

I am struggling for this proposal on two sides — and I apologise in advance if I am missing context here:

  1. Best monetisation and diversification of treasury assets
  2. Progress towards further decentralisation of the governance token

I won’t comment on (2) here, since @Philadelphia has already asked the questions in a great manner.

The only additional point is that, probably, a primary issuance of new $LDO tokens might make more sense for further decentralisation, although this might well not be the right time to execute it given market conditions.

On (2), however, I would like to provide some comments. How do we know that the counterparty (Dragonfly) and the conditions proposed are truly the best for Lido? Proponents are providing a blanket statement saying that this has been the best deal achievable, but could more colour be provided?

In traditional investment banking, an Accelerated Book Building exercise would have been completed. Such ABB would have marketed the opportunity to a roster of investors, and gathered interest around quantum and price. Only following that, the allocation would have been completed. Most probably, the final receivers would have been a combination of institutions rather than a single one. This would have further benefited price and helped (1), i.e. decentralisation. I haven’t seen anything like it in the current proposal — although noting that proposal #2 is significantly better than #1.

The recent governance turmoil at MakerDAO taught us that token distribution is extremely important (the extremely couldn’t be emphasised enough) when building solid governance frameworks for a project as central to Ethereum’s as Lido. I would have expected a treasury diversification proposal be more thoroughly designed, especially when coming from a protocol that has been at the forefront of governance innovation through the recent dual governance proposal — to me one of the most virtuous examples of crypto governance proposals out there.

Thanks in advance for your comments, Luca

4 Likes
20

This is a significant improvement over the first deal at least. It shows the important of getting community input in the negotiating process.

Building a treasury, under the right terms, is essential and I will support it.

1 Like
21

What happens now with the terms of the agreement considering that the price of $LDO has risen much more than the theoretical sale value, and beyond the price at which DragonFly can get out of the agreement? At what value will it be sold?
Apparently only with this sale, depending on the price at which it closes, no more sales of $LDO would be needed to ensure financing for the correct development of the protocol, could you confirm it please?
Thxs

1 Like
22

The time has come, so what will happen? @tomhschmidt @jbeezy

1 Like
23

We’ll need to wait for the snapshot to end first, and then see what the twap & what DragonFly Ventures decision here would be.

5 Likes
24

The snapshot isn’t finished yet — 8 hours left to go.

3 Likes
25

The proposal has passed in favor of the listed terms.
https://snapshot.org/#/lido-snapshot.eth/proposal/0x2a8415951a9462c5800522f2e2ac1e3ca52996494931a23c900fd4c8a7aff589

The final TWAP as calculated:
7 day TWAP: $2.311650
With multiplier: $2.427232

Dragonfly has committed to the terms and will not enact the veto clause.

Will work on operational process and post an update shortly.

Thank you to the community and for the feedback in this process.

16 Likes
26

Thanks Jacob! We at Dragonfly are excited to proceed with the proposal at this TWAP :slight_smile:

12 Likes
27

Great news! Just one Q: what’s the ‘multiplier’?

2 Likes
28

Hi, it must be 5% premium in the second pricing option:

"DragonFly will commit to a final LDO price that is the higher of the following:

  • Previously defined TWAP price + 50% premium (~$1.45 per LDO)
  • 7-day backward looking TWAP taken at the time of vote completion (on chain voting) + 5% premium"
5 Likes
29

Good to see this sale completed!

4 Likes
30

An update for the community.

We are waiting for internal reviews of the sale contract so that the locking mechanism for LDO and sale can be completed trustlessly. We expect this to be completed by end of the week.

We are targeting the Aragon vote to go live on the 16th of August with a standard 72 hour voting period.

I will provide additional updates as we move forward but wanted to set expectations that we are working on this and will complete it as quickly as possible.

10 Likes
31

Just a question about why we need an Aragon onchain vote here? to trigger the transfer and token vesting?

2 Likes
32

Exactly, yes. Tokens are in the dao treasury and nothing can be done to them without an on-chain vote.

10 Likes
33

Confirming that we will be purchasing 8.5MM LDO with 20,631,472 DAI from address 0xB953E202C5E51C7C010E80402a63C02f37F14059 and 1.5MM LDO with 3,640,848 DAI from 0xCDF3A93611d097461B1103a9208cFc50F3298f7D

7 Likes
34

The Aragon vote for funding the purchase contract from the Lido DAO has started: Lido DAO Voting UI !

5 Likes
35

How to check Treasury Diversification Part 2 contract & vote

The Aragon vote for funding the Treasury Diversification II contract has started — Lido DAO Voting UI. The vote itself does three things: 1) sends said 10MM LDO to the contract address; 2) grants role necessary to assign LDOs with vesting; 3) calls start method to kick off the purchase timer. After the vote (if passed) is enacted, DragonFly would have 30 days to complete the purchase.

The purchase contract address is 0xA9b2F5ce3aAE7374a62313473a74C98baa7fa70E and can be found in docs Deployed Contracts | Lido Docs

To check the setup one can use the public data shared by DragonFly Treasury Diversification #2 - Part 2 - #33 by tomhschmidt There are two addresses with dedicated allocations; the corresponding data in contract is checked by calls to ldo_allocations — two addresses should account for ldo_allocations_total of 10M tokens (with 18 zeros)

The contract also specifies:

  1. DAI/LDO rate — dai_to_ldo_rate returning 10**18/purchase_rate where purchase rate should be the 2.427232 we’ve shared on forum: Treasury Diversification #2 - Part 2 - #25 by jbeezy

  2. Offer timeframe (if the purchase isn’t concluded by that time — DAO can return the LDOs back to Treasury) — offer_expiration_delay which is 30 days in seconds

  3. Vesting params (1-year lockup after which all tokens would be fully transferrable) — vesting_start_delay equaling vesting_end_delay equaling 365 days in seconds

While all those things can be checked on Etherscan, code repo has a script: GitHub - lidofinance/ldo-dai-purchase-executor

11 Likes
36

The vote has passed & was executed! Can check the status of the sale on etherscan: Vyper_contract | Address 0xA9b2F5ce3aAE7374a62313473a74C98baa7fa70E | Etherscan

3 Likes
37

All Done! Congrates Lido community & Dragonfly.

Last payment:

12 Likes