Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process.
Applicant Name: Seraphim
Project Name: Lido Finance
Project Description: Lido is the largest liquid staking protocol on the Ethereum network
Team Member and Qualifications: Seraphim (DAO contributor). DeFi expansionist
Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?: Yes
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size: 4M ARB
Teem: Till end of January
Grant Breakdown: Grant will be used to incentivise liquidity around wstETH on the Arbitrum network. wstETH already trades on multiple venues on Arbitrum like Kyber, Curve, Uniswap, Balancer etc. Maintaining liquidity on key venues is important for maintaining utility of the wstETH asset.
Funding Address: arb1:0x1840c4D81d2C50B603da5391b6A24c1cD62D0B56
Funding Address Characteristics: 4/6 multisig
Clearly outline the primary objectives of the project and the Key Performance Indicators (KPIs) used to measure success. This helps reviewers understand what the project aims to achieve and how progress will be assessed.
The first objective is maintaining and improving wstETH liquidity on Arbitrum DEXes vs ETH and stables
The long-term objective, however, is allowing users to mint stETH natively on Arbitrum. This would make Arbitrum the first L2 to allow that, and would be a huge vote of support from Lido to Arbitrum.
However, to achieve that, there needs to be sufficient onchain liquidity for whales to buy/sell and to borrow vs their holdings on Aave. This has been the feedback hence this grant is targeting liquidity and supply caps.
I personally think getting this grant passed will mark a new page in Lido x Arbitrum relationship as ecosystems. It can become be the first step towards achieving native minting on Arbitrum, but it starts with this grant.
Key Performance Indicators (KPIs):
- TVL across DEXes, 2% depth trade size and volumes.
- Increase supply caps for wstETH on lending protocols
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?:
wstETH has benefitted from very high liquidity on Arbitrum in the past. It has contributed to the Arbitrum ecosystem as well by enabling efficient LST trading, which is something mostly associated with mainnet.
This can be clearly seen from very competitive slippage on ETH → wstETH vs cbETH and rETH:
Swapping 1000 ETH → wstETH: -0.01% slippage
Swapping 1000 ETH → cbETH: -4.24% slippage
Swapping 1000 ETH → rETH: -0.16% slippage
However, to preserve the utility of wstETH on Arbitrum, more incentives may be required in the future. This will enable native LSTfi products to develop natively on Arbitrum such as Ethena, Raft, Gravita etc.
A popular trade in DeFi is looping stETH rewards vs ETH via lending protocols. When that happens or the trade gets unwound, wstETH/WETH buys and sells are routed via DEXes. It is crucial that liquidity is maintained for these trades to occur.
Also, if Arbitrum wants supply caps increased on its lending markets, it requires high onchain liquidity to get risk houses like Chaos labs and Gauntlet onboard. From this perspective, Arbitrum and Lido are well-aligned to foster favourable liquidity conditions for wstETH.
Similarly, various yield-enhancing dapps like Instadapp rely on these looping strategies. Favourable liquidity brings them onboard as well.
Native minting on Arbitrum
The combination of high DEX liquidity, adoption across verticals like lending, yield optimisers etc can lead to Lido DAO allowing native stETH minting on Arbitrum. This is a long-term goal and requires sizeable stETH holders to be more comfortable with L2s, but is in line with the L2-dominated feature of the ETH ecosystem.
Justification for the size of the grant: wstETH has a TVL of $130mil on Arbitrum, which is huge. It’s the most popular asset on lending markets and trades actively on DEXes.
Execution Strategy: The funds will be handled by the Liquidity Committee within Lido DAO. It will pursue the objective of maintaining and improving wstETH/WETH and wstETH/USD liquidity on suitable DEX venues and deposits on lending protocols.
|Protocol Name||Total Sum (1000 ARB)||Description|
|Gov tokens vs WSTETH DEX pairs||450||Bootstrap most traded gov tokens/wstETH liquidity|
|wstETH/GMX on Uniswap V3||150|
|wstETH/PENDLE on Uniswap V3||25|
|wstETH/PENDLE on Camelot||25|
|wstETH/ARB on Uniswap V3||200|
|wstETH/RDNT on Balancer V2||25|
|wstETH/RDNT on Uniswap V3||25|
|ETH vs WSTETH DEX pairs||750||Bootstrap wstETH/ETH liquidity|
|wstETH/WETH on Uniswap V3||300|
|wstETH/WETH on Camelot||75|
|stETH/WETH on Curve||100|
|wstETH/WETH on Balancer V2||100|
|wstETH/WETH on Kyber||75|
|wstETH/WETH on Pancakeswap||75|
|wstETH/WETH on Trader Joe||25|
|Stables vs WSTETH DEX pairs||1,750||Bootstrap wstETH/stables liquidity|
|wstETH/USDT on Uniswap V3||1,200|
|wstETH/USDC on Camelot||150|
|wstETH/USDC on Kyber||150|
|wstETH/USDT on Pancakeswap||150|
|wstETH/USDT on Trader Joe||100|
|Other||1,050||Bootstrap wstETH deposits and looping|
Grant Timeline: Grants will be used by end of January.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? Yes
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the Protocol Native to Arbitrum?: No
On what other networks is the protocol deployed?: Protocol deployed on mainnet ETH, wstETH is bridged and officially supported on Arbitrum, Optimism, Neutron and Polygon PoS.
What date did you deploy on Arbitrum?: October 2022
Protocol Performance: Lido on Arbitrum has been a massive success on major venues
There is $50mil TVL alone on Aave:
Similarly, Radiant has attracted almost $50mil TVL:
Protocol Roadmap: Lido will continue to prioritise liquidity across trading venues. The next big item is community staking, whereby node operators will be able to join Lido permissionlessly, and hence further decentralise the protocol.
Another item on the roadmap is minting stETH natively on other L2s like Arbitrum. With sufficient liquidity and partnerships, Lido could enable Arbitrum users to do that. This would be a huge deal for the future of L2s.
I cannot stress enough how impactful that would be, but it requires a tighter partnership between Lido and Arbitrum.
Audit History: Lido has been extensively audited by multiple reputable firms: GitHub - lidofinance/audits
Provide details on how your team is equipped to provide data and reporting on grant distribution.
Is your team prepared to create Dune Dashboards for your incentive program?: Yes, Lido DAO has a well-equipped analytics team to do so
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread? Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: Yes