Post beacon chain launch and pre-withdrawals, rewards-driven deep DEX pools were a key part of what made LSTs work and stETH the most successful amongst them. There are still cases where incentives can be justified post withdrawals, although the primary need for them has ended. This tries to outline different categories where rewards in the post withdrawals world can still make sense, and in each case, why and how. ## Justifiable cases for incentives **Expansions** - In general, it should be justifiable to spend treasury funds in expansions of stAssets, be it the boostrapping of a new one or the expansion of an existing one into a new chain/ecosystem (needless to say, modulo the expansion making sense in itself). - Being first to market on Arbitrum and Optimism, and further wstETH expansions are business goals for the DAO -- and boostrapping TVL, liquidity and integrations in such cases seems a worthwile application of the reWARDS program. - Well defined expansion rewards budgets should be planned to allow the execution of the DeFi BD playbook for these expansions: sufficiently bootstrap and maintain DEX pool liquidity for the stAsset to get a price oracle on that chain and then the lending and CDP integrations. - These expansion rewards budgets should also always be allied to significant co-incentives allocations from the ecosystem we are expanding to. **Collateral Integrations** - Aave, Maker, and other important DeFi integrations have brought tremendous TVL, utility and defensibility to stETH; - The most important integration type is for collateral use, and it relies on liquid markets to function (from being accepted in the first place to getting good risk parameters and usage). - DEX liquidity is still relevant for these to function safely post withdrawals, and fully unincentivized pools may not suffice at some points; - As part of their work for the Lido DAO, [Openblock Labs](https://www.openblocklabs.com/lido) is analysing what these levels are so that every month the committee can ascertain if the incentives lever should be pulled as either a way to increase supply caps or to preserve current ones (via pools TVLs), or if no action is needed (the default mode). **Accessibility** - Incentives that, broadly defined, ease in some way a user's access to Lido's stAssets; - We've done gas rebates on Oasis/Maker vaults in the past, on Zerion, and on OKX; - These are generally very cheap budget-wise and can make sense in various cases. **Bootstrapping Pools or Integrations** - If incentives have a decent shot at bootstrapping an important pool or integration that itself has a path towards being sustainable without rewards in a reasonable period of time, there will be cases in which rewards can be justifiable; - The recent ma3WETH-wstETH mainnet balancer pool is, I think, a good example here. Its an improved balancer pool that will both contribute to wstETH's growth via the supply of WETH to Morpho-Aave-v3, where it's only use case is to leverage up on stETH, while having a high organic APR & eventually receiving perpetual BAL emissions from its core pool status (once it starts generating revenue for the Balancer DAO, aka, after it has some size) ([more context](https://twitter.com/MorphoLabs/status/1671157214986534916?s=20)); - There are other conceivable integrations, in which if incentives were the sufficient lever to make them happen, these could also be justified; - Examples of the above could, in my mind, be entrenchment/moat building integrations such as: wstETH being substantially included in [GMX's GLP](https://gmxio.gitbook.io/gmx/glp) or as the ETH portion of stkAAVE or veBAL. --- After time for feedback and some soft consensus, I think we should use some refined and/or expanded version of this draft as operating principles to allocate onchain wstETH rewards, and always justify allocations under a category. It is a more limited and defined scope, that also further raises the bar on what is Additionally, as reWARDs has shrunk tremendosly in size and importance, it does make sense to include it in a broader "liquidity committee" or structure, as we've been discussing for a couple weeks.