Hey guys - it’s Ashwin from Dragonfly. Appreciate the constructive discussion, and wanted to share our team’s view on this proposal.
The primary purpose of the proposal is to ensure that the LidoDAO has adequate runaway in the case of continued market volatility. The LidoDAO currently has ~75 full-time contributors with annualized operating costs totaling $16-18MM. In our view, it’s critical for the LidoDAO to have ample stablecoin reserves to meet its payroll obligations over the next 18-24 months.
Dragonfly has been an active supporter of Lido since we participated in the first treasury diversification round last year. However, due to the constrained allocation for funds outside of Paradigm, our support has been limited to strategy calls and specific requests from core Lido contributors.
That said, we’re long-term investors and are looking forward to being more active in governance assuming this diversification proposal passes. We have never sold any of our purchased LDO from the previous round (despite unlocks), and do not intend to sell LDO purchased from this treasury sale at any point over the next few years.
We have the following additional thoughts on lockup terms/pricing:
-
Regarding Price
a. If the LidoDAO were to market-sell 20M of LDO, its average execution price would be far lower than the current market price due to inconsistent liquidity and advance market knowledge of the sale. This will result in high price slippage if the tokens are sold within a short timeframe.
b. The LDO price increased by ~245% in the past 7-days. Given this volatility and the inconsistent liquidity (daily trading volume fluctuates between 50-150m a day), we believe the pricing methodology used is fair (7-day backward TWAP with a 50% premium).
c. Thus, we are not open to changing pricing for this sale. -
Regarding Lockup
a. A more traditional deal offering a discount on LDO tokens in exchange for a lockup would result in a lower sale price given interest expressed to Dragonfly/Lido by other potential sale participants. This would result in far less operating capital for the LidoDAO unless the LDO sale amount is increased.
b. The entity we’re using to purchase LDO tokens from the DAO has liquidity restrictions. This means it’s difficult for us to invest in illiquid token deals, hence the no-lockup structure of this deal.
We’re committed to honoring the result of a vote. However, since we cannot guarantee the participation of additional parties, we recommend splitting the vote into two parts. Part One will be a sale of 10m LDO to Dragonfly at the posted price + premium. Part Two will be a separate sale of 10m LDO to additional participants with different terms.