Ethereum staking giant Lido mulls choices for its $30M ETH

The decentralized autonomous organization (DAO) behind Lido — the largest Ethereum staking pool — is deliberating whether it should sell or stake the $30 million in Ether (ETH) from its treasury.

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

Another would see LidoDAO selling a part or all of its 20,304 ETH for a stablecoin, with the purpose being to extend the DAO’s runway.

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

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

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

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

Regarding operating expenses, Steakhouse Financial suggested it may be necessary to swap Ether for a stablecoin in order to “preemptively secure additional runway.”

Steakhouse Financial noted that with LidoDAO’s current inflows at about 1000 stETH per month, the DAO is making approximately $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.

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

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

However, they’re still deliberating whether it is worth converting excess stETH into a stablecoin to better prepare for any change in market conditions that may lead to increased operating expenses.

A business development representative from LidoDAO noted that they’re not particularly thrilled with the current state of the stablecoin market:

“Considering all the FUD and rumors, both DAI due to USDC collateral and USDC itself pose potential risk if they become frozen. That being said I have issues with the liquidity of LUSD and USDT has yet its own issues.”

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

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

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

Lido Analytics: Feb 06 – 13, 2023

TLDR:- Lido TVL is down -6.66%, following a -7.22% fall in the price of ETH.- Lido led in new stake on Ethereum, with a 27% share in weekly deposits.- New @AaveAave V3 wstETH: 34,726 (+34.87%).- Lido on Polygon reaches 2% market share. pic.twitter.com/iWA9YccM6e

— Lido (@LidoFinance) February 13, 2023