Wednesday, February 21, 2024

Sell ​​or Stake: Ethereum Flirting Lido Giant Is Considering Options for 30 Million Ethereum


The Decentralized Autonomous Organization (DAO) behind Lido – Ethereum’s largest storage pool – is debating whether it should sell or stake $30 million in Ether (ETH) from its vault.

A proposal was made in February. 14 by the financial unit of the DAO, Stickhouse Financial which is considering four options, one of which is considering acquiring part or all of the ETH on Lido in the form of Lido Staked ETH (stETH).

Another could see LidoDAO selling part or all of its 20,304 ETH for a stablecoin, aiming to expand the DAO’s runway.

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The four proposals (pictured) that Steakhouse Financial submitted to LidoDAO ask how it should manage the treasury. Source: Lido

The proposal comes as withdrawals of ETH bets will soon be enabled by Ethereum’s Shanghai and Capella upgrades expected sometime in early 2023 according to the Ethereum Foundation.

While converting ETH into Staked ETH could result in more rewards for the protocol, the DAO is wary that too much staking could risk not having enough Ether on hand “just in case.”

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The assets are currently held in the LidoDAO treasury. ETH currently accounts for about 9% of the DAO’s treasury holdings of more than $350 million. source: Lido.

In terms of operating expenses, Stickhouse Financial suggested that it may be necessary to exchange Ether for a stablecoin in order to “proactively secure additional runways.”

Steakhouse Financial noted that with current inflows of LidoDAO at around 1,000 stETH per month, the DAO is making roughly $1.3 million to $1.5 million per month with the price of ETH hovering between $1,100 and $1,700 over the past few months.

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The monthly flow of stETH on Lido has increased steadily since January 2021. Source: Dune analytics.

Steakhouse Financial said those numbers alone should be “enough to cover its monthly operating expenses.”

However, they are still debating whether it is worth converting the excess stETH into a stablecoin to better prepare for any change in market conditions that could lead to an increase in operating expenses.

A business development representative from LidoDAO notes that they are not particularly happy with the current state of the stablecoin market:

“Given all the FUD rumors, both DAI due to USDC collateral and USDC itself are potential risks if frozen. However, I have issues with LUSD liquidity and USDT still has its own issues.”

It appears as though most LidoDAO members are in favor of a partial sale and risk of a portion of the 20304 ETH locked in its Aragon smart contract.

Related: Lido has overtaken MakerDAO and now has the highest TVL in DeFi

The proposals come as the Total Value Locked (TVL) of stETH fell 6.66% in the period from February 4. 6-13.

The TVL of Lido is currently valued at $8.13 billion, according to on-chain metrics platform DeFiLlama.