What is this about?

The community has been engaged in a discussion about a proposal by Seraphim for a grant application for their project, Lido Finance, a liquid staking protocol on the Ethereum network. The grant, which was initially proposed to be 5M tokens but later reduced to 4M ARB, is intended to incentivize liquidity around wstETH on the Arbitrum network. The primary objectives include maintaining and improving wstETH liquidity on Arbitrum DEXes vs ETH and stables, and allowing users to mint stETH natively on Arbitrum. The grant will be managed by the Liquidity Committee within Lido DAO and is divided into several categories. The proposal status has been changed from DRAFT to FINAL.

How is the community reacting?

The community's reaction to the proposal is mixed. Some members, such as MotusCM, Frontalpha, CDahmen, MF_DROO, and JoakimEQ, support the proposal, believing it can foster a thriving ecosystem on Arbitrum, drive DeFi activity, and alleviate slippage due to limited liquidity on DEXes. However, others, including Meyaf320219, Whereismymind, LucaDSQ, Iamnico, Peter, Hanniabu, ArbDefender, Flindy, Medocons, Spuppen, Bob-Rossi, and ITUblockchain, express concerns about the grant's size, the potential for centralization, the risk to Ethereum's credible neutrality, and the lack of transparency in the allocation of incentives.

Why this is positive?

The grant proposal is seen as a positive move as it aims to foster growth and innovation within the Arbitrum ecosystem, particularly in terms of DEX liquidity and lending markets. It also has the potential for native minting on Arbitrum, which would be a long-term goal. The grant could also drive DeFi activity and create a flywheel effect of LSTfi products on Arbitrum. The proposal could potentially improve short-term liquidity and attract larger institutions to prioritize Arbitrum over its competitors. It could also lead to the development of a method of bridging over multiple LSTs in one bridged wrapped token to Arbitrum.

Why this is negative?

Some community members express concerns about the grant proposal. They argue that the grant size is too large for a non-native protocol and that Lido should pay for their own liquidity. There are also concerns about the grant potentially harming decentralization and Lido being a systemic risk to Ethereum. Some members suggest a reduced proposal with more details on what native protocols this will support. There are also questions about the need for such funding, especially given the existing liquidity of stETH and the potential for the funds to be better used elsewhere. The proposal's allocation and incentivization clarity, grant duration and size, and the addition of new verticals like SocialFi have also been questioned.