Crypto Staking Service Provider Lido Finance has begun discussions on a governance proposal to sell 20 million Lido DAO (LDO) tokens and diversify its treasury into stablecoins to fund its operating needs.
Lido Finance Proposes to Sell LDO for DAI
On Monday, Jacob Blish, Lido Finance’s head of business development, presented the proposal. As per the proposal, the DAO should sell 20 million LDO tokens to private investors, representing 2% of the entire LDO token supply. According to Blish, this will provide the Lido DAO with roughly two years of operational runway.
“This will ensure Lido and its core contributors are able to continue the important work needed for the protocol in the long term and to flourish as an autonomous, self-governing collective,” he said in the proposal.
The Lido DAO presently has $230 million in its treasury. This contains 157 million Lido DAO (LDO) tokens ($241 million), 20,940 ETH ($32 million), and 4930 staked ETH ($7 million). Only roughly $366 worth of stablecoins is held by the DAO.
Dragonfly Capital to Lead the Investment
According to the conditions of the proposed token sale, Dragonfly Capital will be the primary investor. Dragonfly will purchase half of the tokens (around 10 million), while the remaining 10 million LDO will be purchased by “other strategic participants,” which the plan did not reveal.
The proposal read, “We believe Dragonfly and other strategic partners will be valuable to the future decentralization and growth of Lido’s ecosystem.”
It is unclear whether this proposal will be submitted to an on-chain vote or whether it will finally be approved. A Lido developer proposed selling half of Lido’s ether holdings last month, but the proposal did not make it to an official DAO vote.
If the deal gets accepted, the Lido treasury will receive $29 million from investors in the DAI stablecoin at a price of $1.452153 per token. This price is based on the most recent 7-day TWAP (time-weighted average price) of the LDO token plus a 50% premium on the TWAP.
Lido’s Dominance in Ethereum Staking
Lido Finance is a leading provider of liquid staking for proof-of-stake blockchains such as Ethereum’s Beacon Chain, Solana, Polkadot, and Cosmos. Liquid staking unlocks the value of staked cryptocurrencies through staking derivative tokens that can be deployed on other various DeFi protocols.
Lido provides liquid synthetic tokens termed as stAssets, which are backed one-to-one by the native token of a proof-of-stake blockchain. Holders of Lido DAO (LDO) tokens govern the project.
According to a blog post published on Monday by the development team of the staking protocol, Lido will expand to several Ethereum Layer 2 solutions. The update will introduce a wrapped version of Lido’s ETH staking token, dubbed wstETH, to Layer 2 DeFi.
LDO is currently trading at $1.51, up 7.27 % in the last 24 hours at the time of writing. Meanwhile, it has increased by 138% in a week and 220% in a month, according to data from CoinMarketCap.
Given Lido Finance’s role in the Ethereum 2.0 staking contract, the Ethereum Merge upgrade is the primary driver of the current LDO rise. The announcement of the date for the update sparked a significant surge in the LDO token, resulting in an almost 200 % profit for investors in the last few days.