In Buffer Against Bear Market, Lido Opens New Door for DAO Money Management

The Lido Finance DAO has rolled out a governance proposal to diversify the asset makeup of its treasury in an effort to serve as a buffer against current market conditions.

The plan ought to ensure the Lido DAO (decentralized autonomous organization) will have enough capital to fund operating expenses for roughly two years.

Lido suggested selling 2% of its native token, LDO, from the DAO treasury. The token will be priced at a 7-day time weighted average price (TWAP) under a 50% premium, roughly $1.45 per token. On Thursday, LDO traded around $1.50.

Digital asset-focused venture capital firm Dragonfly Capital is in the running to purchase a sizable number of tokens, according to Lido — although there are “a number of interested parties” the collective did not identify. 

Adam Cochran, general partner at venture capital firm Cinneamhain Ventures, told Blockworks he doesn’t “think the deal is adequately priced.”

“Whenever you’re buying a block of tokens from the team over the counter, you are both impacting the circulating supply and avoiding price slippage, so there is a baked-in price discount,” Cochran said.

If the proposal is approved and Dragonfly leads the buy, it could mark a new era for DAO treasury management. 

“This type of structure should have already been more common because it doesn’t make sense for your treasury to be fully in your own token,” said Mika Honkasalo, a digital asset researcher and investor. “You need to have proper runway and you can’t rely on the market always being on your side.” 

The majority of LDO’s treasury is at present made up of the organization’s native token — equating to some $237 million — according to data from Token Terminal. $366 is now held in stablecoin USD Coin. 

Despite being at odds when it comes to pricing, Cochran said the investment would be a smart move for Dragonfly as current volatile market conditions continue.

“Right now, after a collapse of a lot of speculation in the space, there is a huge incentive for investors to back projects that have a path to revenue and ownership of key infrastructure,” Cochran said. “Lido is one of a handful of projects that has both that opportunity and a product market fit, and I think the interest in these types of projects is going to continue to grow as we face uncertainty in macroeconomic conditions and as we see some of the froth come off the crypto space.” 

Voting for the proposal, which was released Monday, has not opened yet. 

“I think people are on board with a variation of [the proposal], for sure,” Honkasalo said. “If you have to raise, you have to raise. Some version of it will get passed.”

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