Lido DAO Prepares for Liquidity Risk with Contingency Market-Making Mandate

Lido DAO is considering a contingency plan to ensure liquidity for its $LDO token on centralized exchanges. A governance proposal, posted on September 16, would authorize a contingent market-making mandate in case trading volume drops further.

The proposal points to a significant decline in LDO trading volume over the past year, from approximately $96 million to around $33 million per quarter. This has led to thin order book depth, making it more vulnerable to pair degradation and delistings.

If approved, the mandate would be capped at 480,000 USDC plus up to $1.5 million in LDO equivalent, limited to 7.5 million LDO tokens. It would expire two years after approval if not activated. The proposal favors a fixed-retainer structure over option-based compensation and disbursements would flow through Easy Track motions.

Lido's Growth Committee would determine the need for activation based on factors such as order-book depth, volume trends, and signals from exchanges. If the mandate is activated, the committee would negotiate with one or more professional market makers to ensure sufficient liquidity.