Treasury Diversification #2 - Part 2

Proposals
1

Ok, lets try this again. :slight_smile:

Link to the original thread for context: Treasury Diversification #2 - #109 by jbeezy

DragonFly Ventures has agreed to swap in place of DragonFly Liquid.
They are offering the current best terms regarding ongoing discussions and size.

The updated proposal is focusing on DragonFly buying 1% (half) of the total 2% offered originally. The remaining 1% will be handled at a future date.

The terms of the proposal that will be put to a vote

  1. 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

  2. DragonFly will have the ability to withdrawal from the commitment if LDO price exceeds $2.25 during the vote timeline.

  3. There will be a 1 year lock up vesting period. This is similar to previous diversification terms.

The proposal voting options

  • Yay - Execute proposal as stated
  • Nay - Do not execute this proposal

If there is any confusion please specify.
If there are objections about this going to an on-chain vote, please specify why.

We would like to put this up to a vote tomorrow at approximately UTC 10pm (6pm EST).

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This is a good improvement on terms. I appreciate that half of the sale is being done now, half at a future date.

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Good improvement on terms, especially lockup. Im for the deal.

Some questions for @jbeezy:

  1. Is this vested over 2 years with a 1 year cliff?
  2. Did the team consider selling the ether first? If not, why?
  3. Where is the team currently paid from? Payment to team members doesnt currently appear to be from the treasury.

Thanks

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  • Due to a majority of supply already being liquid but held this is a 1 year vest in total. During conversations extending the lock required steeper discounts.
  • We have discussed that quite a bit. The impossible to answer question is what will be more likely to move over the coming months and provide a better future hedge? We felt ETH would be better served to keep in case of emergencies and has a higher total liquidity making it easier to move quickly if the need arrises.
  • 4 of the 20 proposed work streams are currently funded by the RCC (from the treasury). As described in the provisional budget only recently has Lido had to move to take on the cost of the additional work streams. This was due to early partners and node operators housing some of those costs and risks in exchange for an allocation of LDO. At the time of inception, Lido had much more risk and unknowns in December 2020.
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Hi all – Tom from Dragonfly here. Excited about the new treasury diversification proposal and the opportunity to deepen our relationship with Lido. I wanted to clarify a few points about the last proposal and clear the air a bit, as things have gotten a bit crazy.

First, to clarify: Dragonfly has two separate divisions, Venture (which Haseeb and I mostly work on) and Liquid (which Ashwin, who was commenting on the forum post for the last proposal, mostly works on). The funds managed by each division have separate investment strategies. Our Venture funds have long, multi-year fund lifes, and venture investments generally have lockups and vesting. The Liquid team has similar technical backgrounds and a similar ethos to the Venture team – investing in generational projects in crypto – with the exception that they almost always invest in publicly-traded assets due to the liquidity constraints of their fund.

With LDO being a publicly traded token, this deal was allocated to our Liquid team, as it’s more aligned with the type of opportunities they naturally take on. The Liquid team had already developed an investment thesis on LDO and had been buying LDO on the open market, and this seemed like a great opportunity to both accumulate more and build a stronger partnership with the Lido team at the same time. After conversation with the Lido team, at their suggestion, the Liquid team used their existing LDO to vote on the proposal out of the address 0x641c. (While obvious in retrospect, at the time, the perception among us and the Lido team was - well, you guys bought these tokens on the open market, you’re not so big as to dictate the entire vote, so of course you get to vote with them—they’re governance tokens after all, and owning tokens means you get to be a voice within the DAO. Lesson learned :skull_and_crossbones:.)

Before the vote launched, Dragonfly Liquid and the Lido team were under the impression that the proposal would have strong community support given that Liquid was buying the LDO at a significant premium to a spot TWAP. But because the entire market ran up between the proposal and the vote, the TWAP + premium now became a discount to the spot price. When feedback started to pour in and it became obvious that the community also wanted a lockup before the deal would go through, the Liquid team switched their vote with the assumption being that a lockup is what the community wanted, so Dragonfly Ventures could step in to take the deal, given our ability to handle lockups.

Not surprisingly, confusion ensued, made worse by the fact that this was happening over the weekend and syncing up communication across multiple time zones and multiple teams on non-working hours is tricky. (Plus we’re highly regulated, so we have to be careful what we say in public). We had no malicious intentions, we just wanted to buy some LDO, fr fr.

Anyway, all of that aside, we’re excited about the new proposal. We’ve heard you loud and clear that you want to see a lockup, and we’re happy to furthermore add a premium to the spot price to make everyone happy. If you have questions, open to respond to any feedback you may have!

(Disclosures can be found here)

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I’d object to this going to a vote on the grounds that the market has more clearly recognized the value of LDO since this proposal initially was posted. The market running up in price between the initial proposal and now is grounds to reassess the value that can be sold to Dragonfly and the TWAP value made in the initial proposal should be recalculated as of the date of this new proposal. I think the Lido team and the community should recognize its own value especially if it has the optionality to use some of its ETH treasury as runway while finding investors for a private sale that will recognize the value of LDO.

Also, the addition of a right of refusal to the second half of the commitment makes this less attractive and does change the calculus of the vote.

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Private sale looks good but I think dao wants to and should make it transparent. Otherwise, some will doubt if the private deal is good enough to the DAO and token holders. In this case, I feel DAO mechanism is so struggling and it needs more work to facilitate transparency and efficiency.

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@jbeezy @tomhschmidt
Hello everybody，I am Yimang.Ding, the product manager of SolvProtocol.
This is a new proposal from the Solv core developers again. We are also aware that directly selling $20M worth of LDO to strategic partners may raise concerns among most community members.

As the concerns ramp up, we are here to officially introduce Solv Vesting Voucher, a proven solution, to help lock the LDO tokens into liquid financial NFTs.

Introduction

The Vesting Voucher is a tool for managing and distributing allocations, flexible in vesting schedules and the type of vesting. It’s capable of locking up any ERC20 tokens and vesting them over a period of time. A user can customize the Vesting Voucher to release tokens either linearly, one-time-off, or based on a custom vesting schedule.

Aside from the lockup function, users of the vouchers can trade their vouchers in full or in fragments (with the vesting schedule unchanged) on Solv’s marketplace, liberating a certain liquidity without inducing any sort of sell pressure.

We sum up our proposal with the following embedded messages:

Highlights (TBD)

Asset Offered: $LDO Vesting Voucher

  • Issue Value: $10M
  • Lockup Duration: 12 Months
  • Start Date: 8/15/2022
  • End Date: 8/15/2023
  • Price: 105% of $LDO (7 day back looking TWAP)

*We have developed a new feature for the vesting voucher in the sense that the holders with the locked LDO in the form of vesting voucher are capable of notching incremental voting rights. Please taking aims at followings for more info:
https://snapshot.org/#/strategy/erc3525-vesting-voucher

Solv Protocol has successfully issued more than $60 million worth of tokens in the form of vesting vouchers for ParagonsDAO, ColdStack,DoDo, WooNetwork, HighStreat, and so forth. Furthermore, 4 million worth of insurance for Vesting Voucher is purchased from Unslashed and 4 times of Audits get approved, both of which prop up the future sale with an aim of securer protection.

In general, the clear cut advantages of this proposal could be summarized as follows:

  1. Vesting Voucher along with 1 year lookup period serves as a buffer, easing of immediate sell off as the market go south
  2. The vouchers are divisible and can be traded on Solv market, OpenSea, or any NFT marketplace, offering more liquidity options to holders
  3. Lido is feasible on setting copyright royalty for the subsequent voucher transaction (Optional)
  4. Vesting Voucher weighs up the governance rights to its holders (Optional)
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It might be a better way if the team, or other community members just place an ask order on the treasury token sale, and let anyone who is interested in placing a bid order publicly. That will give the community alternatives other than just the “For or Against” binary options.

BTW, the current version is far better than the last one, and I’ll for this proposal if it is really emergency for funding the operating runway.

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alright put it up for vote and lets go

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Nicely handled by Lido core team + Dragonfly. Appreciate the write-up from @tomhschmidt ! Will support this proposal.

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we will also be supporting this proposal!

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Will support this proposal.

Very quickly, since @tomhschmidt responded “while obvious in retrospect” and “lesson learned” to @cobie 's request for abstention, I’d just like to point out that this is not at all obvious. It was a sweet dunk but if you think about it for 10 seconds its worthless as a precedent or norm. When, exactly, is it appropriate for an entity vote in their own self interest? What happens after the very obvious next step of: send tokens to exchange → send tokens to new unidentified wallets → vote → profit?

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@Cortina Agree that it’s not reliable and can’t really be enforced as any form of good faith “rule” – but would also imagine that any good-faith entity would observe their own conflicted interests in such a vote.

Don’t think we should ever rely on people being good actors. But do think that self-dealing through a conflict of interest is a signal of a bad actor. Obfuscating that self-dealing is a further sign of bad actor.

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Why not try the sucess token model

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Is there any transparency into who the 17m vote that ultimately led to the no vote being passed was?

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The proposal has been put up for a snapshot vote and if successful will move to Aragon for on-chain voting. Voting period is 7 days.

https://snapshot.org/#/lido-snapshot.eth/proposal/0x2a8415951a9462c5800522f2e2ac1e3ca52996494931a23c900fd4c8a7aff589

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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.

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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

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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.

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