Liquid staking giant Lido Finance is finally looking to shake up its tokenomics.
Specifically, as explained in a new proposal, community members are looking to add a stake in LDO.
Note: To stake directly on the mainnet, users need 32 ETH or around $60,000 at current prices. Due to the high barrier to entry, liquid staking services such as Lido have emerged, allowing users to deposit any amount of ETH and start earning.
Seeing this proposal developed will be a top priority for many in the space. Lido, however, is the largest DeFi project with a massive TVL of around $12 billion.
The proposal is still in its early stages, but here’s the pitch in a nutshell:
LDO owners can stake tokens and start earning rewards derived from the protocol’s revenue. Lido now generates revenue by charging users a 10% fee on those rewards. Half of that goes to the project’s DAO and the other half goes to the various node operators that implement the actual mainnet staking.
This new proposal stipulates that, if passed, stakers will earn between 20% and 50% of Lido DAO’s revenue. Basically, up to half of the 5% service charge. And this will be implemented through buybacks, where the generated income will be used to buy more LDO tokens (and distributed).
But it’s not free money. For added yield, LDO stakers also become “insurance providers of last resort,” the proposal reads.
If the project’s insurance fund is depleted due to a hypothetical mass-slashing event, up to 30% of LDO stakers’ funds will be next on the chopping block.
Slashing refers to the punishment thatValidators will face if they suffer any downtime or start validating fraudulent transactions on the network. Remember the 32 ETH that need to be deposited to join the network? Slashing takes some of that deposit away from the validator.
Lido, however, made assurances that such an event “is unlikely to occur due to the quality of Lido’s validator set and its proven track record.” However, this is a risk.
It’s not super rare either.
, for example, does this precisely through its safety module. AAVE owners can stake their tokens, get more yield, but also carry a similar risk of being slashed if the lending platform faces a bad debt situation.
Due to the general opinion of the community on the proposal, we will probably see a new draft soon.
This is a great first attempt at adding a little functionality to what is essentially a voting token after all.
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