Sell or stake: Ethereum staking giant Lido mulls choices for its $30M ETH

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

A offer was unveiled on Feb. 14 by the financial arm of the DAO, Steakhouse Financial, which is considering four options, one of which involves staking some or all of its ETH on Lido in the form of Lido Staked ETH (stETH).

Otherwise, LidoDAO will sell some or all of its 20,304 ETH for a stablecoin in order to expand the DAO runway.

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

This offer comes as ETH staking withdrawals will soon be possible thanks to the Ethereum Shanghai and Capella upgrades expected to take place sometime in early 2023. according to to the Ethereum Foundation.

While converting ETH to Staked ETH could result in more protocol rewards, the DAO fears that too many stakes could result in it not having enough Ether “if needed.”

The assets are currently held in the treasury of LidoDAO. Currently, ETH accounts for about 9% of the DAO’s treasury holdings, worth over $350 million. Source: Lido.

In terms of operating costs, Steakhouse Financial suggested that an Ethereum-to-stablecoin swap might be needed to “proactively provide additional runway.”

With a current LidoDAO influx of around 1,000 stETH per month, Steakhouse Financial noted that the DAO is earning 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.

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

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

However, they are still debating whether or not to convert their surplus stETH into a stablecoin in order to better prepare for any changes in market conditions that could increase operating costs.

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

“With all the FUD and rumors, both DAI due to USDC collateral and USDC itself are a potential risk if they are frozen. That being said, I have LUSD liquidity issues, and USDT has its own issues.”

It appears that the majority of LidoDAO members are in favor of a partial sale and staking of a portion of the 20,304 ETH locked in the Aragon smart contract.

Lido overtakes MakerDAO and now has the highest TVL in DeFi

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

TVL Lido is currently worth $8.13 billion. according to to the DeFiLlama online metrics platform.

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