[ARCHIVED] Mantle x Lido strategic collaboration

[General Archive] Mantle
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Background

Lido Finance is a decentralised liquid staking protocol that assists users to earn rewards from staking their Ethereum while also maintaining liquidity through a token, stETH. Through a robust infrastructure, regular security audits, and a DAO governance model, Lido DAO puts security of staked assets first and democratises decision-making within its ecosystem.

Objective

Primary Objective

  • Bootstrapping a vibrant and sustainable LST ecosystem on Mantle L2
  • Bringing blue chip DeFi protocols to Mantle L2

Proposal

  1. Allocate 40,000 ETH from the BitDAO treasury to stETH
  2. Use the allocated stETH to bootstrap DEX liquidity and integrations across Mantle
  3. Establish a first-of-its-kind revenue-sharing agreement between BitDAO and Lido DAO for the duration of 12 months
  4. Include Mantle in Lido’s bridging plans to enable seamless stETH bridging to Mantle
  5. Collaborate on a gasless bridge for Mantle users powered by stETH

Revenue Sharing

The usual staking reward setup within Lido is:

Stakers: 90%
Node Operators: 5%
Lido DAO Treasury: 5%

This first-of-its-kind for Lido revenue sharing agreement would return a percentage of revenue earned by Lido DAO Treasury to BitDAO 12 months after the arrangement comes into effect.

The revenue sharing agreement would last 12 months with a possibility to extend subject to a DAO vote.

The exact terms of the revenue share should be in line with the recent proposal on Lido DAO forum (and are also subject to this proposal passing the Lido DAO vote): Tiered Rewards Share Program: A Sustainable Approach to stETH Growth - Business Development - Lido Governance

However, should Mantle seek terms that deviate from this proposal (for eg higher % of rev share given size allocated to stETH), a separate vote within Lido DAO shall be arranged. The Mantle ecosystem would have to reason that the integration with Lido can create disproportionate benefits for Lido DAO. (It is my personal opinion that it could be the case due to the vibrant ecosystem and Bybit CEX userbase, but that’s ultimately up to the DAO)

Bootstrapping Liquidity

The allocated stETH should be used to bootstrap liquidity across DEXes like Uniswap, Curve and native AMMs.

While that is ultimately up to the BitDAO community, this proposal recommends allocating DAO-owned stETH/ETH liquidity into prominent DEXes on Mantle. Sufficient trading activity and TVL is likely to convince prominent lending protocols like Aave to deploy on Mantle and set a substantial supply cap and LTV on wstETH. This would in turn create sticky trading flows as users loop staking rewards.

stETH Risk Assessment

Smart Contract Risk
Lido Finance’s stETH represents a liquid tokenized claim on staked Ethereum. The underlying smart contracts powering this functionality have undergone thorough audits by highly reputed firms. These assessments concluded the contracts’ robustness and solidity.

Utility
The utility of stETH is substantial due to its widespread integration across the DeFi space. StETH provides holders with the ability to earn staking rewards while also participating in other DeFi activities, such as yield farming or providing liquidity, thereby enhancing its utility. Its integrations with popular DeFi protocols like Curve, 1inch, and Aave further validate stETH’s broad acceptability and usage within the DeFi ecosystem.

High Liquidity
The liquidity of stETH is another crucial factor contributing to its position as a market leader. With billions of USD worth of stETH LP’ed across multiple DEXes and ecosystem, the existence of robust pricing feeds, the risk of insufficient liquidity is greatly reduced.

Conclusion

Apart from clear commercial use cases, this proposal is testament to Mantle’s high potential as a Layer 2 within the DeFi ecosystem and as a Tier 1 partner for Lido DAO. I believe this proposal would set the stage for a wider integration endeavour between the two DAOs and greatly increase Mantle’s attractiveness for DeFi’s user base.

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Thanks for the detailed proposal, @Seraphim. This is a great solution for Mantle. In short;

  1. Mantle gets the leading LST token on its network. LSTs have primarily been one of the largest drivers of network activity/growth so it is important for Mantle to get this right and ensure that there is sufficient liquidity and app integrations with an LST (which stETH has accomplished and would help bring over).

  2. Partnership between two of the largest DAOs (BitDAO and Lido DAO) and the establishment of a rev-share agreement on the 5% revenue attributed to the Lido DAO Treasury. If Mantle builds its own LST it will take significant costs and fragment liquidity on the network - this solution enables profit from the get-go and an active working relationship that solidifies liquidity on DEX’s and Tier-1 app deployments.

Looking forward to seeing this proposal progress and ironing out the rev-share agreement and liquidity plans.

Full support.

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Gmgm. Popping in to back the proposal from my view.

I agree that a net new LST will be intensive to bootstrap but do not think any approach excludes the value of bringing wstETH to the Mantle ecosystem.

Looking forward to the discussion here on this topic.

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this prop is a great way to foster partnerships across the ETH ecosystem whilst generating revenue for the treasury.

imo this should not replace mntETH as it would be great to have a diversified basket of LSDs on Mantle Network and beyond

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Dont you believe it would be more beneficial for the mantle to have its own liquid staking solution?

I believe it would be more beneficial for a project of this size to capture on this, have its own community around it and can actually keep the LST fees for itself instead of continue to boost Ethereum centralization

You are mentioning costs and Liquidity fragmentation, but there are Whitelabel eth LST solutions out there that are quite cheap, audited, reliable and Mantle can actually keep the control of the product and its community

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Hello, cryptohuntz here from Alphaverse DeFi Fund. We are a 100% on-chain DeFi fund focusing exclusively on Ethereum and its Layer 2s. We are very involved in the Liquid Staking vertical, with exposure to all the top LSTs. In my opinion, it would be much more beneficial for the Ethereum staking ecocsytem if the 40,000 ETH was allocated to various LSTs vs just Lido stETH. Lido stETH already controls ~31.8% of the entire staked ETH ecosystem, which is dangerously high and against the ethos of a decentralized network. We need to do a better job as a community in spreading out the risk of using just Lido. As one example, Frax Finance’s $sfrxETH is a great alternative to stETH, and it consistently receives higher staking yield than stETH, and any other LST in the market. Thanks for taking the time to read this post!

-cryptohuntz

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We should be cautious to prevent another FTX incident, and we should build our own LST ecosystem on Mantle L2

We should protect investors，Build your own ecosystem

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Judging from the current strategy, I don’t think it should give you money so casually. I think the treasury’s money should pay more attention to its own Mantle ecology. So I don’t agree with you asking for money :grin:

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It would be irresponsible to go all in on stETH like this. Lido is very undercollateralized and has just 30 Node Operators; a reckoning is inevitable. Either Mantle should do their own LST, which would be the best solution, or use a mixed bag of LSTs, stETH/rETH/frax/Swell… or some of both (a mantle LST and some mixed bag of LSTs).

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Why not deposit your ETH into Mantle. Why should Mantle do risky things? We should learn from FTX lessons

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Will not support it unless they deposit ETH in Mantle. Why should Mantle do risky things

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I would suggest Lido can stake their ETH in our Mantle LSD

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I don’t think is a fair deal. :no_mouth:

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Thanks for this great input, sincerely it is a wonderful proposal

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We should be cautious to prevent another FTX incident, and we should build our own LST ecosystem on Mantle L2

We should protect investors，Build your own ecosystem

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I firmly oppose to this proposal.

I was certainly worried when I first saw it. I thought that maybe Mantle and its users could get carried away by Lido’s offer. There’s an already heated debate about Lido centralization “potentially” threating the network health (we can already say it’s not potential, but real, and this proposal confirms it further), so it would be a bad move, both for Ethereum and Mantle itself.
I’m really excited for Mantle launch to interact with it myself, but this sentiment would suddenly change as soon as Mantle decided to turn a blind eye on this matter and went all in with Lido. And I strongly believe that many other ETH users would feel the same way.

So, if Mantle needed to get their ETH staked with an LST while they polish mntETH, it should be a bag of LSTs, not prioritizing stETH at all.
If ever, Lido should be the one interested in getting themselves positioned for a promising L2. Not the other way around. They are just trying to capture an even larger size of the pie, as if it wasn’t concerning enough what they already have.

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I vote against. Same ideas as the previous 15 replies: much better for Mantle to create its own liquid staking solution, or to liquid stake the treasury ETH using several liquid staking protocols (Rocket Pool, Lido, Stader, Frax… )

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Hi all, @Willem here with the Kiln team. I thought it would be interesting to engage with the Mantle community here directly to share our thoughts on this proposal.

As staking technology provider and node operator endorsed by the Ethereum foundation for our infrastructure practices, we see staking as the closest equivalent to a protocol’s risk-free rate and a great reward mechanism in the crypto treasury manager’s toolset, so we’re thrilled to see more of these DAO staking initiatives happening. A liquid approach is a great idea and offers many advantages, however Lido’s dominance in this market is already staggering (32.29% of overall staked ETH and 74.49% of the liquid staking market) and their solution comes with a set of constraints.

A dedicated Mantle LST launched in partnership with Kiln is possible right now and would allow the community to meet primary objectives mentioned above while helping to keep the network decentralized and offering a number of key additional perks which I will outline below.

Mantle can own its token and control the design. With the Kiln Onchain platform, Mantle can easily configure and deploy a liquid staking smart contract, enabling the creation of its own branded LST (e.g. mtETH). This integration grants flexibility to choose validator providers. Mantle users can deposit ETH to acquire the LST, enjoying auto-compounding and restaking features in DeFi.

There are two token models you can choose from, both with distinct characteristics:

aTokens: the amount you hold will remain constant while their value grows over time. Their value will increase as the pool generates more rewards.

cTokens: maintain a fixed exchange rate with the ETH. As rewards are earned in the pool, the number of cTokens you hold increases. This allows you to accumulate a greater quantity of tokens representing your share of the pool’s rewards.

aTokens are highly composable, relative to cTokens, and can be seamlessly integrated and utilized across diverse DeFi protocols, applications, and platforms. While aTokens can be advantageous with additional composability, they may lead to increased taxable events in certain jurisdictions.

Freedom extends into governance. Mantle has the choice to manage the integration contract either independently or through multisig. These thoroughly audited contracts offer numerous parameters. Partnering with Kiln for the token provides Mantle the flexibility to set end-user fees, a feature not available with Lido. With this capability, Mantle gains the flexibility to set an initial rate at a comfortable threshold and make updates later if necessary, be it for commercial reasons or to support network decentralization, as discussed in Vitalik’s article on published last week on The Defiant addressing Lido’s dominance.

Revenue share in perpetuity. Rather than relying on an unprecedented 1 year revenue share from Lido that needs to be re-approved on a regular basis, Mantle would own the commission structure for users of the LST forever.

Control over validator operations. Because of Kiln Onchain’s modular integration format for validator operators (think lego bricks), Mantle would have full control over how many validator operators to include as well as which ones. This allows Mantle to have a direct say in the decentralization of ETH staking.

A Mantle-branded LST serves as a powerful marketing tool, enhancing visibility and growth. We welcome the community’s feedback on this idea, as we believe a dedicated LST aligns with our vision for a thriving DeFi ecosystem.

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Those here who opposed Lido taking over Mantle, there is another proposal to also dislike, here:

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Hey everyone,

I’ve noticed some opposing comments here, and I feel it’s important to address a few misconceptions about Lido on Ethereum and LSTs. Let’s take a moment to understand the reasons why I think that some comments here do not make a lot of sense:

  1. The Complexity of Lido on Ethereum: Firstly, it’s essential to comprehend how Lido on Ethereum works. Mentioning recent incidents like the FTX issue and concerns about undercollateralization is just trying to build up FUD. I recommend reading Lido’s docs as a start: Lido | Lido Docs and asking potentially unanswered questions afterwards.
  2. The Development and Launch Process: Developing, launching, and growing a new LST (Liquid Staking Token) protocol is no easy feat. It requires extensive resources, both financial and human, to ensure a robust and secure platform.

Now, let’s shed some light on why stETH/wstETH has gained widespread support in the Ethereum ecosystem. Here are a few valuable points:

  1. Security Policy Matters: Lido V2 underwent rigorous audits by not one, but nine different auditing companies. This level of scrutiny demonstrates the team’s commitment to security. Moreover, there is an ongoing bug bounty program (Bug Bounties with Immunefi | Lido Docs), encouraging community involvement in finding and fixing vulnerabilities.
  2. Battle-Tested Reliability: stETH/wstETH has proven itself over time, with a track record of stability and reliability. Such battle-tested protocols instill confidence among users and attract more participation.
  3. A Strong Network of Collaborations: Lido’s success is further bolstered by its collaborations with top-tier protocols and clients. This wide network of partnerships enhances the overall strength and credibility of the platform.

It’s crucial to remember that achieving the level of success Lido on Ethereum enjoys isn’t just about financial resources. It requires a well-thought-out strategy and time to execute that strategy effectively. Building a solid reputation and growing the protocol in various aspects, such as collaborations, decentralization, and technical features, are equally vital.

It is reasonable to question the decentralization and permisionlessness since those questions can not just be answered with simple Yes/No or 1/0 replies. There is a path which can be followed here: The Lido Decentralisation Scorecard

Let’s foster constructive discussions and gain a deeper understanding of the impressive accomplishments of Lido on Ethereum. If you have any questions or want to learn more, feel free to ask!

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