Transaction
The Eagle Ops Guild, hereby submits a financial signalling proposal that the Aragon Association stakes all the 50k ETH with Lido and Rocket pool (worth $94m at the time of writing). The funds are currently managed by the Aragon Association on the Ethereum chain in the following smart contract addresses:
- 0xfb633f47a84a1450ee0413f2c32dc1772ccaea3e
- 28,443 ETH, worth 52.7m at the time of writing
- 0xcafe1a77e84698c83ca8931f54a755176ef75f2c
- 29,078 ETH, worth 53.9m at the time of writing
The custody of the requested funds, at least for now, remain with the Aragon Association.
By staking ETH, the Aragon project can contribute to securing the Ethereum ecosystem while also earning yield.
Staking with Lido & Rocket pool
The preference for Lido as a liquid staking protocol is not only based on the fact that it is the most battle tested solution with the highest liquidity and TVL. Lido is also a relevant stakeholder in Aragon’s ecosystem as the protocol is built and reliant on Aragon’s secure smart contracts. The 2nd suggested LSD, Rocket pool, is also battle tested as it concerns the 3rd largest LSD at the time of writing that is significantly more focused on decentralized staking.
Exploration of future staking options
We acknowledge decentralization is also a relevant metric to consider in the protocol selection. Therefore, we will keep exploring other options to stake ETH in a more secure, battle tested, and decentralized way.
Expectation of staking with Lido
We expect the following returns by staking 40.00k ETH directly with Lido, given an expected APR of 4% - 6%.
| Amount of ETH staked | 40,000 ETH |
|---|---|
| Expected APR: | 4% - 6% |
| Expected year one | |
| return in ETH | 1,600 ETH - 2,400 ETH |
Expectation of Rocket pool allocation (20% of 10k ETH)
Conducting the liquid staking option, by staking 10k ETH directly with Rocket pool, with an expected APR of 3% - 5%
| Amount of ETH staked | 10,000 ETH |
|---|---|
| Expected APR: | 3% - 5% |
| Expected year one | |
| return in ETH | 300 ETH - 500 ETH |
Risks & Dependencies
As with any allocation, staking ETH through liquidity staking derivatives (LSD’s) such as Lido or Roket Pool, carries a certain amount of risk. The team identified several risks and dependencies that should be taken into account:
Smart contract risk
As the functionality of liquidity staking derivatives is dependent on the proper functioning of smart contracts. There is a risk that the smart contracts could have bugs or vulnerabilities that could be exploited by attackers, resulting in financial loss.
We are mitigating this risk by only staking with Lido protocol, which has undergone rigorous code reviews and security audits. We will also closely monitor the development of these platforms and stay informed about any security issues that may arise.
Slashing risk
As validators who participate in the staking process can be penalized if they behave maliciously or negligently, it could result in a loss of funds.
Lido inherently mitigates the slashing risk as it has a selected group of trusted validators.
Liquidity risk
As LSD’s are relatively new financial products, there is a risk that there may not be enough liquidity in the market to buy or sell staked tokens when desired. This could make it difficult to exit a position or could result in unfavorable prices.
This risk is mitigated by the implementation of Ethereum’s latest Shanghai hardfork.
Regulatory risk
As the operation of a liquidity staking derivative, like Lido, depends on regulatory compliance, there is always a risk that regulators could introduce new rules or regulations that could impact the operation of these platforms. This could lead to increased costs or restrictions on the use of these platforms.
