[HIP-24] - Approve Lido Finance gauge

Proposal ID: S1.3

Introduction

This proposal seeks community approval to add a new gauge to Hermes, in collaboration with Lido Finance;

• wstETH/ETH 0.01% (Minimum width: 1)

Liquidity for this gauge is already in place on UniV3 on Arbitrum:

• wstETH/ETH 0.01% https://app.uniswap.org/explore/pools/arbitrum/0x35218a1cbaC5Bbc3E57fd9Bd38219D37571b3537

Strategic Alignment

Lido is a highly successful liquid staking platform, currently ranked as the number 1 protocol on Defillama, with over $23bn TVL.

Hermes Protocol would welcome Lido with an allocation of Hermes tokens to bootstrap this gauge, as part of our launch event for top DeFi protocols. Going forward, Lido would be able to particpate in our Partnership Program, potentially participating in the Accumulating and Bribing sports. These programs have been designed to reward behaviours that help to grow and maintain the health of Hermes, and thus to allign incentives for long term, universally beneficial participation for all ecosystem actors.

Lido would use all fees collected from voting for their gauge as bribes in the following epoch, to further incentivise more voters to vote for their gauge, increasing APR for LPs who are staking. They will consider adding direct bribes to the gauge from their liquidity mining programs, after the gauge has been live for several months, and they have data on which to make an assessment of the benefits of doing so.

Upon the successful passing of this governance proposal and the launch of the gauges, Lido is happily committed to co-marketing activities to help introduce the Hermes protocol to their community through their Community twitter channel - https://x.com/lidocommunity.

Gauge performance analysis

Snapshots of the relevant historical metrics of the UniV3 pool on Arbitrum:

Pool TVL: Currently $9,000,000

Weekly Fees:

Market impact analysis

Hermes gauges will give optionality to Lido LPs, who can choose to stake their positions, exchanging fees for emissions of the Hermes tokens. This in many cases will offer boosted rewards, incentivising LPs to join the pool and thicken the depth of liquidity for Lido's wstETH.

Gauges also facilitate highly capital efficient deployment of liquidity mining incentives through bribes, as Lido would only be paying rewards to LPs in an active range around the current price, denominated in ticks. This can result in better APRs for LP's with smaller inputs of capital, and thus again, thicker liquidity. Hermes gauges further enable strategic deployments of incentives to target specific goals, such as price stability for wstETH.

Risk assessment

• Volatility of fee revenue over time - Volume and TVL metrics are relatively stable with occasional spikes. In most cases there should not be a problem regarding over / under paying for liquidity rental.

• Smart Contract Risk - As the liquidity comes from a 3rd party, Hermes cannot guarantee that there is no additional smart contract risk from integrating the Lido tokens. As the leading liquid staking provider they are of course heavily audited and battle tested, and tokens are bridged using the official Arbitrum native bridge. However users should do their own due dilligence before interacting with these pools.

• Lido audits: https://github.com/lidofinance/audits

• Systemmic Risk - LP's should be aware of Lido LSD tokens use elsewhere in DeFi including in some leveraged strategies, and thus potential for liquidations in periods of high volatility, impacting the price stability of the pools.

Ending note: This proposal created in accordance with the relevant guidelines for adding gauges as delineated here