Ethereum betting giant Lido considers options for its $30 million ETH

by · February 14, 2023

The decentralized autonomous organization (DAO) behind Lido – the largest stake pool for Ethereum – is considering whether to sell or stake $30 million in Ether (ETH) from the treasury.

A proposal was submitted on February 14 by the DAO’s financial unit, Steakhouse Financial, which considers four options, one of which considers staking part or all of its ETH on Lido in the form of Lido Staked ETH (stETH).

Another would see LidoDAO sell part or all of its 20,304 ETH for a stablecoin, with the aim of expanding the DAO’s runway.

The four proposals (pictured) sent by Steakhouse Financial to LidoDAO asking how it should manage the treasury. Source: Lido

The proposal comes as withdrawals of ETH stakes will soon be enabled through Ethereum’s Shanghai and Capella upgrades expected to take place sometime in 2023 according to the Ethereum Foundation.

While converting ETH to Staked ETH could lead to more protocol rewards, The DAO is wary that too much stake could risk not having enough Ether on hand “in case of need.”

Assets currently held in LidoDAO’s treasury. ETH currently accounts for approximately 9% of the DAO’s over $350 million treasury holdings. Source: Lido.

As for operating expenses, Steakhouse Financial suggested that it may be necessary to exchange Ether for a stablecoin to “preemptively secure additional runway.”

Steakhouse Financial noted that with LidoDAO’s current supply of around 1,000 sTH per month, the DAO is earning approximately $1.3 million to $1.5 million per month with the price of ETH hovering between $1,100 and $1,700 in recent months.

The monthly inflow of stETH at Lido has been steadily increasing since January 2021. Source: Dune Analytics.

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

However, they are still considering whether it is worthwhile to convert excess stETH into a stablecoin to better prepare for changes in market conditions that may lead to increased operating costs.

A business development representative from LidoDAO noted that they are not particularly excited about the current state of the stablecoin market:

“Considering all the FUD and rumours, both DAI due to USDC security and USDC itself pose a potential risk if frozen. That being said, I have issues with the liquidity of LUSD and USDT has yet to their own problems.”

It seems that most LidoDAO members are in favor of partially selling and staking a portion of the 20,304 ETH locked in the Aragon smart contract.

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

The proposals come as the total value locked (TVL) of stETH fell 6.66% between 6-13. February.

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