- Lido Finance is considering a proposal to introduce a staking feature for its native LDO token, aiming to increase the token’s utility and financial sustainability.
- The proposal, created by a community member known as Lidomaxi, suggests redirecting 20-50% of future Lido DAO revenue to LDO stakers.
- The community’s reaction to the proposal is mixed, but it has sparked significant discussion, suggesting that future drafts or refinements may be likely.
Liquid staking giant Lido Finance has been making waves in the DeFi sector with a proposal for a staking feature to its native governance token, LDO. This move aims to add more utility and financial sustainability to the token, which is currently primarily used for voting rights within the ecosystem.
Shaking Up LDO Tokenomics
Proposed by a Lido community member known as Lidomaxi, the suggested change outlines a plan that allows LDO holders to stake their tokens in exchange for a percentage share of Lido’s future earnings, estimated between 20% and 50% of the protocol’s revenue. Lido, one of the dominant leaders in the liquid staking space, generates revenue by levying a 10% fee on user rewards. The proposed system would distribute earnings to stakers via buybacks, using generated revenue to purchase more LDO tokens which will then be distributed.
This proposal emerges as a solution to current and prospective token holders’ primary concern: that despite the protocol’s tremendous success, LDO token holders do not directly benefit from the revenue generated by the protocol. In essence, Lidomaxi’s proposal presents a direct approach to value accrual for LDO, driving more than just voting power but also monetary benefits for its holders.
Tying Protocol Success to LDO
Under the proposed changes, staking rewards would be paid out weekly. However, to further align token holders’ interests with the protocol’s success, these newly earned LDO tokens will be subjected to a 6-month vesting period. This incentive design ensures that participants have a vested interest in the long-term performance and sustainability of Lido.
The proposal also indicates that stakers would act as the “insurance providers of last resort.” Should the project’s insurance fund ever be drained due to a hypothetical mass-slashing event, up to 30% of LDO stakes funds would be next in line to cover the deficit. This further ties the interests of LDO holders to the success and safety of the Lido protocol, creating an ecosystem of mutual benefit and shared responsibility.
Lido Community’s Reception and Future Prospects
The reception of the proposal among token holders is a mixed bag. Some praise it as a significant step towards giving LDO “something useful” beyond being a voting token, while others express reservations, referring to it as a potential “Ponzi scheme.” Despite the varying opinions, it’s clear that the community is actively engaging with the proposal, suggesting that a refined draft may likely surface soon.
Steakhouse, a financial advisory firm for several decentralized autonomous organizations (DAOs), is among those voicing support for the proposal. Even critics like Hal Press, the founder of hedge fund North Rock Digital, who has been previously critical of LDO, acknowledge the proposal’s potential to address LDO’s value accrual issue.
Ultimately, this proposal is a crucial example of the continued innovation in DeFi and the flexibility of blockchain governance. The evolution of LDO’s utility and the active involvement of the community show how protocols can adapt and evolve to meet the needs of their users, fueling the future of decentralized finance.