Lido Lend: One Initiative Too Many for Lido?

A Look Back at Lido’s Expansion Strategy

Lido in a Nutshell

Launched in 2020, LLido is a pioneering liquid staking protocol, a market segment built on a simple observation: the cost of becoming a validator on EEthereum (32 ETH, or roughly $77,000 at current prices) is too high for the average user, which mechanically restricts the validation process to a narrow circle.

Liquid staking protocols address this problem as follows: a user deposits ETH, which is then staked through professional validators, and the protocol issues a liquid staking token (LST) in return at a theoretical 1:1 ratio. In Lido’s case, stETH represents staked ETH and its value increases automatically every day. Its wrapped version, wstETH, builds these rewards directly into its price.

LSTs allow users to capture yield from native Ethereum staking while holding a liquid token that is composable across on-chain finance. It can, for example, be used on protocols such as SparkLend, Aave or Morpho, notably through looping: users deposit wstETH as collateral, borrow ETH, convert it into wstETH, redeposit it, and so on.

According to DefiLlama, roughly $7.22B of wstETH and $8.45M of stETH were deposited in lending protocols as of October 19. Most stETH is currently restaked on EigenCloud rather than used in lending.

Today, Lido is by far the leading liquid staking protocol on Ethereum with $23.37B in TVL, ahead of Binance Staked ETH ($8.5B), ether.fi ($4.6B) and Rocket Pool ($1.24B), according to DefiLlama data.

On the operational side, 90% of staking rewards go to users,  with the remainder split between node operators and the LLido DAO+2.21% treasury, which is governed by LDO holders.

Diversification as a Remedy for Single Exposure to ETH

In practice, Lido’s revenue depends directly on 3 variables:

• The price of ETH, since Lido’s revenue is earned in ETH and then converted into dollars;
• ETH issuance and staking yield;
• Its market share in the ETH staking segment.

In the first half of 2026, ETH lost 47% and Lido’s share of Ether staking slipped from 23.93% to 21.18%. According to Lido, staking growth came mostly from institutions, particularly companies accumulating ETH in their treasuries, such as Bitmine, and staking ETFs, as well as from CEXs such as Upbit, Binance, Coinbase and Kraken.

Meanwhile, liquid staking activity on Ethereum slowed fairly significantly. In November 2025, Lido reported modest growth of around 5% year over year for the sector, in sharp contrast with the 18% increase seen in 2024.

At the same time, 47% of staked ETH at that point was deposited in liquid staking protocols, a figure that had not moved in 15 months. Things have since deteriorated, as that figure now stands at just 38% according to DefiLlama.

Since its revenue is directly tied to ETH, Lido adopted GOOSE-3 in December 2025, a horizontal expansion plan explicitly aimed at diversifying its revenue streams. In reality, this expansion had already begun with the Lido Earn initiative, yield vaults launched in 2025 and then reorganized in 2026 into EarnETH (ETH and derivatives) and EarnUSD (USDC/USDT).

In 2026, 2 new products were launched under this framework:

• stVaults: a customizable staking infrastructure for institutions, launched on January 30, 2026 with Lido V3.
• Wisp: a confidential AI assistant owned by the DAO, launched in August 2026.

On October 7, 2026, Lido contributors presented Lido Lend on the forum, a new product described as a lending market built on a modified fork of Morpho Blue. Lido is targeting a rollout this quarter, subject to DAO approval. The problem is that the expansion strategy Lido has embarked on does not seem to convince everyone, given how its other projects have performed. That is what we will dig into in this article.

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A Closer Look at What Lido Lend Promises

As a reminder, Morpho Blue, launched in 2024, is a lending protocol organized into isolated markets: each market pairs a loan asset, a collateral asset, an oracle and a liquidation threshold (LLTV), all set at creation. Anyone can create a market, and curators then manage vaults that allocate deposits across several markets.

Lido Lend takes the isolated-market architecture and places it under DAO governance, but without the curation layer. According to Lido, users will be able to interact with the markets directly or go through external integrations such as Fluid, Gearbox or DeFi Saver, and existing curated vaults like EarnETH and EarnUSD are expected to be among its first users.

In the initial proposal posted on the forum on October 7, Lido Lend is presented with the following objectives:

• screen out stolen funds before they enter the system as collateral;
• guarantee lenders deep liquidity and reliable exits, whatever the market conditions;
• stick to blue-chip assets in correlated pairs, such as wstETH/WETH;
• enforce predictable borrowing rules, so that looping positions can be unwound even during periods of stress.

Lido Lend thus targets 2 audiences: passive lenders with a long-term view, and professional borrowers. It is important to understand that this product is not designed as a general-purpose lending product and should not be seen as a direct competitor to existing protocols. The idea is rather to round out Lido’s existing toolkit.

At the time of writing, the detailed Lido Lend proposal has not yet been formalized. For now, all we have is the draft available on the forum and a few details on the mechanisms to be implemented, published by Izzy, a Lido contributor.

Fallback Exits

To fully grasp the point of Fallback Exits, it helps to go back over a few basics of traditional lending: when nearly all of the lent asset in a pool has been borrowed, lenders can no longer withdraw their funds until borrowers repay their positions or new deposits come in.

This mechanism is governed by a utilization rate specific to each pool and exists today on almost every lending protocol. As a general rule, the utilization rate directly sets the borrow rate and the yield for depositors, so as to keep the whole system in balance.

The idea behind Fallback Exits is to give lenders a way out when a market is saturated. In that scenario, a depositor could complete their withdrawal using the collateral posted by borrowers. For example, on a wstETH/WETH market that has run out of WETH, they would receive wstETH, and the debt of the borrowers drawn upon would be reduced by the same amount. Positions closest to their liquidation threshold would be tapped first, which protects the healthiest positions.

Naturally, such a mechanism can only exist for correlated assets. Beyond the wstETH/WETH example mentioned above, it also works for stablecoin markets backed by RWAs such as Treasury bills, since the logic is the same: a stablecoin lender stuck due to a lack of liquidity would receive tokenized Treasury bills, an asset whose dollar value barely moves.

For now, Lido has not yet published the conversion formula between debt and collateral. In other words, we do not yet know at what price the collateral will be valued when Fallback Exits are triggered. Yet this choice determines who bears the loss in a real crisis.

Let’s take a theoretical example: a lender wants to withdraw 100 WETH, but the market does not have enough liquidity. They therefore receive wstETH instead. If it is valued at the oracle price while trading lower on the market, the lender gets back less value than they lent.

Conversely, if Lido applies a haircut to wstETH to reflect its market price, the borrower will have to hand over more tokens to clear the same amount of debt. The cost of the gap is then borne by the borrower.

Guardian Security Council

In a post dated October 22, Lido presented the 2nd mechanism specific to Lido Lend: the Guardian Security Council. In practice, each market will have its own “council,” made up of independent operators whose role will be to monitor the nature of the funds flowing through it.

The goal is to prevent a market from being affected by funds stemming from hacks or manipulation, a scenario that unfortunately often has knock-on effects for other users, as the KelpDAO / LayerZero episode showed. Aave V3’s WETH market utilization rate hit 100% within a few hours, blocking depositor withdrawals for lack of available liquidity. This is exactly the situation Fallback Exits are meant to prevent.

The idea is as follows: all collateral will have to go through a form of “maturation,” meaning a period during which the council can ban the associated address before it is able to borrow anything. The length of this period, as well as the choice of providers responsible for screening, will have to be voted on by the DAO.

Council members cannot freeze or move funds, change a market’s parameters, or block repayments, liquidations or withdrawals from an account with no debt.

What Potential for Lido Lend?

On paper, offering specialized markets tailored to the needs and possibilities of ETH and Lido’s derivatives makes sense. First for holders, who get a place to generate yield passively and with peace of mind, but also for Lido, since it allows the protocol to internalize revenue that currently leaks to other protocols.

Indeed, $7.33B of stETH and wstETH is currently deposited in lending protocols, according to DefiLlama. In other words, there is clearly demand in on-chain finance for the assets Lido offers today.

That said, this needs to be put in perspective. The correlated-pairs segment, which is the one Lido Lend is targeting, carries far less weight.

Again according to DefiLlama, markets dedicated to correlated wstETH/ETH pairs on Fluid, Morpho, Curve LlamaLend or Aave v4 total $330M deposited and $286M borrowed, for an overall utilization rate of 86.7%. That represents only 4.5% of stETH and wstETH deposits in lending.

As a result, most collateral remains in pooled markets such as SparkLend or Aave v3, which are precisely the ones Lido Lend does not claim to compete with.

Among the first reactions to this Lido Lend draft on the forum, some have questioned the point of forking Morpho Blue, a protocol whose infrastructure has been extensively battle-tested, only to bolt on new technical features that bring their own logic. Lido’s response is that every change introduced by Lido Lend will undergo external audits.

Above all, Lido has so far published no business case: no launch cost, no TVL target, no revenue model for the DAO. After the disappointments of Earn, stVaults and Wisp (which we cover below), this is precisely what several forum members are calling for, one of them pointing out that “previous developments have only shown losses.”

According to Lido, figures on the required investment and expected return will be published alongside the GOOSE and EGG proposals “around the end of November.”

Earn, stVaults and Wisp: Out-of-Reach Targets?

Note: For the rest of this article, Lido’s latest official figures cover June 30 and July 31; more recent figures come from on-chain data compiled by DefiLlama as of October 19.

With just a few months left in the year, none of the 3 products launched by Lido is anywhere near the targets set by GOOSE-3, nor those set in the first-half report.

Lido Earn

Currently, Lido Earn is the only one of the 3 products we have mentioned to generate truly meaningful revenue. In the first half of 2026, Lido Earn generated $0.27M in gross revenue and $0.23M net, against a cost of $1.29M (including the legacy GGV, DVV and sTRATEGY vaults). Any surplus net revenue, after deducting budget-approved costs, goes entirely to the DAO.

When it released its H1 2026 report, Lido stated that the revenue generated by Earn amounted to roughly 5% of the initial targets.

That said, Lido also noted that the first half was dedicated to growing the product, with fee capture taking a back seat. This translated into periods with no management or performance fees on Lido Earn, which partly explains the weak revenue.

In total, EarnETH and EarnUSD charged $437,000 in fees combined between July 1 and October 19, $387,000 of which came from the former alone. At the time of writing, the 2 vaults show a combined TVL of $237M.

Since October 6, both vaults have applied the same fee schedule: a 0.2% management fee and a 15% performance fee. Annualizing the fees charged from October 6 to 19 gives a gross ARR of around $1.9M, including $1.33M for EarnETH and $0.56M for EarnUSD.

At this pace, Earn would reach only 24% of GOOSE-3’s initial target of $8M in ARR by end-2026, and 38% of the revised $5M target. In other words, this run rate would still need to be multiplied by 2.6 to hit the lowered target.

So even at the pace currently observed in October, Lido Earn would not cover its direct costs, which come to roughly $2.6M per year at the first-half rate.

stVaults

Launched on January 30, 2026, stVaults replicate the ETH/stETH model, but for institutions and professionals. More specifically, a stVault is a non-custodial smart contract unique to each client, into which the client can deposit ETH before choosing its own operator. ETH deposited in stVaults is isolated from the rest of the ETH deposited directly into Lido.

stVaults address an issue inherent to Lido’s classic staking: in the main pool, users’ ETH deposits are pooled and users have no say in which validator their assets are delegated to. In short, this model prevents an institution from selecting its provider, isolating its funds or negotiating its terms.

Unlike classic liquid staking, stVaults require the position to be overcollateralized at a variable rate, known as the reserve. To protect stETH holders, the amount of stETH mintable through stVaults is capped at around 30% of the protocol. If a vault’s reserve falls below the set threshold, its owner can no longer mint stETH. And if it drops further, to the so-called forced rebalance threshold, part of the vault’s ETH can be transferred to Lido’s main pool to clear the equivalent of its stETH liability.

With stVaults, Lido is targeting 3 main client categories:

• First, institutions (ETF and ETP issuers, custodians, funds), which want a dedicated vault, run by the provider of their choice, with control over who can deposit into it.
• Next, node operators, which want to attract deposits directly rather than wait for Lido to allocate them, while offering stETH on their own terms.
• Finally, protocols and asset managers, which use stVaults to build their own products, such as leveraged strategies, restaking or structured yield products.

This enables projects to build tailor-made products, as Linea has done. When users lock ETH in the Layer 2’s bridge, part of those assets is staked in a stVault, which helps fund incentives for the network’s users. This vault, called Yield Boost and operated by Consensys Staking, is currently the largest in the lineup.

On the stVaults side, the DAO earns revenue through fees taken from staking rewards: 1% of the rewards generated by the entire vault as an infrastructure fee, plus fees tied to the amount of stETH minted in a stVault. In practice, each year, the DAO takes the equivalent of 6.5% of the staking rewards that the amount of stETH minted by each stVault would generate.

Example: Take a 100 ETH vault that has minted 60 stETH, with a staking yield of 3% per year. Its 100 ETH generate 3 ETH of yield over the year: the DAO takes 1% of that, or 0.03 ETH in infrastructure fees. The 60 stETH minted correspond to 1.8 ETH in annual rewards (60 × 3%): the DAO takes 6.5% of that, or about 0.12 ETH in liquidity fees. A vault that mints no stETH pays only the infrastructure fees.

So how have stVaults fared? Lido initially aimed for 1 million ETH staked through this solution by end-2026, a target that was cut tenfold in its first-half report, to 100,000 ETH.

Looking at the product’s TVL, growth was fairly modest until the end of June 2026, before it doubled from 5,768 to 11,500 ETH in the space of a month. TVL peaked at just over 34,420 ETH on September 3, then pulled back to around 23,284 ETH at the time of writing.

Today, stVaults are spread across 24 active vaults. In reality, though, nearly 75% of their TVL sits in Linea’s vault, the Yield Boost mentioned earlier, which holds around 17,380 ETH. Meanwhile, only 5 stVaults exceed the 100 ETH mark.

Beyond the fact that the TVL target has yet to be reached under either the first scenario (1 million ETH) or the second, revised-down one (100,000 ETH), revenue is partly held back by the stVaults Committee’s decision to set infrastructure fees at zero until October 31. This program, called the Early Adopters Campaign, was introduced in January 2026 to bootstrap the product and address the wait in the validator entry queue.

Specifically, the Early Adopters Campaign only applies to stVaults with a TVL above 250 ETH, which on paper includes Linea’s and 2 others. However, on-chain data shows that Linea’s stVault does in fact pay these fees.

In short, the takeaway is that this program appears designed to incentivize new stVaults rather than retain the one that accounts for three-quarters of its TVL, since the latter does pay these fees.

For its part, Lido attributes the lack of traction for stVaults to the validator entry queue, which at times exceeded 70 days during the first half. Yet since late May, the queue has steadily shrunk and now stands at only around 21 days. We will see whether the stVaults Committee sticks with this argument to potentially extend the campaign beyond October 31.

Objectively, stVaults have not yet had the expected impact, even measured against targets that were already lowered considerably. TVL now stands at around 23,284 ETH, barely 23% of the year-end target.

In terms of revenue, Lido itself described it as “negligible” in its first-half report. That said, TVL is no longer what it was, which makes this a good time to run the numbers again.

With current stVaults parameters, this product line would bring the DAO 11.8 ETH per year, or about $29,000. Keep in mind that Lido initially targeted 1,000 ETH in annual revenue. On the revenue front, the stVaults scorecard is therefore even worse relative to the targets. Based on the 100,000 ETH TVL target, this would equate to around 100 ETH in annual revenue. Today, that target is only about 12% met.

Wisp

Wisp is a product that strays quite far from Lido’s usual business. It is a “confidential AI harness,” meaning an AI assistant and agents application.

According to Lido, its added value lies in the fact that the requests sent to it are processed in Trusted Execution Environments (TEEs), each of which produces a verifiable cryptographic attestation. Prompts are encrypted and stored only on the user’s device, and meeting transcripts are processed locally. Put simply, Wisp is betting on privacy and confidentiality.

At the end of August, according to Lido, Wisp included the GLM 5.2, Kimi K2.6, GPT-OSS 120B and Qwen 3.6 models in its free version, and Kimi K3 in its paid version. Among other things, Lido is planning an API, mobile apps, shared workspaces following discussions with companies, and a marketplace of ready-to-use workflows for accounting, operations and legal.

Wisp currently offers 4 plans: a free tier, a “Starter” plan at $20 per month, a “Professional” plan at $50 per month, and a “Max” plan priced at $200 per month.

In its first-half report, Lido stated that the product’s waitlist had surpassed 3,000 sign-ups, and set a target of 3,000 paying users by year-end. In August, Wisp had 200 users in total, with a 5% conversion rate to its paid plans, or about ten subscribers. No figures have been shared since, so we do not know whether adoption has picked up.

In practice, Wisp is one of the “vertical expansions” presented by the team at the end of August. That said, judging from the few forum discussions mentioning Wisp, some members struggle to see the link between Wisp and Lido’s core business, or Ethereum for that matter.

Operationally, Wisp is run by Confidential Crab Computing, a company registered in the Cayman Islands and wholly owned by Lido Alliance BORG, itself subject to the DAO’s oversight rights. According to Nemo, Wisp’s revenue is booked within this company and is used to cover its expenses and fund its growth. He also notes that there is no direct relationship between LDO and Wisp.

As things stand, while interesting on paper, Wisp objectively lacks traction and remains very far from its targets, with 10 paying subscribers against 3,000 expected. Wisp’s cost has not been disclosed, as its development expenses were classified under the first-half “New Bets” envelope, which totaled $0.91M.

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The State of the Lido DAO’s Budget

On December 19, 2025, the DAO approved a $60M budget under the GOOSE-3 program, paid out to the 3 foundations overseeing Lido: Lido Labs Foundation, Lido Ecosystem Foundation and Lido Alliance BORG. The budget is split into 3 separate envelopes: protocol maintenance ($26.9M), growth ($16.9M), and a discretionary allocation of $16.2M.

Under the proposal, the growth lines provided $10.8M for the staking ecosystem (including stVaults), $3M to strengthen the protocol’s resilience by upgrading its infrastructure, $1.8M for Lido Earn and $1.3M for products classified as vertical expansion.

The budget Lido requested at the time was based on a specific scenario for 2026, detailed in the proposal. It assumed an average ETH price of $2,712 (the median of the previous 2 years), a staking yield of 2.93%, 10.1M ETH staked in Lido’s main pool and 1.05M in stVaults.

The budget also assumed Lido’s market share would rise to 27.3%, from 24.1% at the time of the proposal, and that the DAO’s share of staking rewards would increase from 5.02% to 6.02%. On that basis, Lido projected $50M in net revenue for 2026, including $45.3M from staking (stVaults included) and $4.7M from Earn and “New Bets,” for a positive net result of $6.2M.

It is essential to understand that the price of ETH is the single most important variable in Lido’s revenue model. The DAO’s revenue is earned in ETH, while the foundations’ expenses are set in dollars. As a result, when ETH falls, dollar revenue falls with it, while costs stay put. To give you an idea, back in February Lido already estimated that with ETH around $2,000, its net staking revenue for 2026 would drop to $33.4M, versus the $45.3M forecast in the budget.

The DAO’s Finances in H1

According to the H1 2026 report, the Lido DAO collected $15.9M in net revenue against $14.3M in expenses, for an operating surplus of $1.6M.

Staking, Lido’s core business, generated an operating result of $6.73M. Over the period, Earn posted a loss of $1.06M, “New Bets” a loss of $0.91M and shared services, meaning the foundations’ overhead, a loss of $3.15M. Excluding one-off items, the half-year operating result therefore remained positive at $1.61M.

However, the LayerZero / KelpDAO attack turned things around. The DAO committed $6.06M to resolve the issue, a cost Lido chose to book under Lido Earn. Including this additional cost, the half closed with a $4.45M loss.

Note: beyond this direct cost, the LayerZero / KelpDAO episode also weighed indirectly on Lido’s activity. After the attack, some users unwound their stETH and wstETH looping positions and retreated into less risky products. EarnETH was hit particularly hard, with its TVL falling from 110,600 to 44,500 ETH after the event, before recovering to 77,900 ETH as of July 31.

All in all, apart from the DAO’s share of rewards, the first half disappointed on every front: the price of ETH, Lido’s market share, and the amount of ETH staked in both the main pool and stVaults all came in well below forecasts.

2026 Budget Assumptions and Lido’s Response

Faced with this situation, the 3 foundations had no choice but to revise their spending for the year. In the first half, they spent $14.3M, less than half of what was planned for the full year, namely $41M (versus the $43.8M initially planned in the December 2025 proposal). In doing so, they used up about 70% of the envelope planned for the period, including 29% for the protocol growth segment.

For the full year, Lido expects around $3.3M in savings compared with the revised $41M budget. In practice, these savings come from 3 levers: fewer partnerships and integrations without a clear return, scrapping planned hires, and pushing certain expenses and asset conversions into the second half, in the hope of getting a better price than current market conditions allow. The foundations’ cumulative spending could thus come to around $37.7M in 2026.

Still, these savings are not enough to truly balance the books. According to the H1 report, with an average ETH price of $1,900 in the second half, the DAO would collect around $30.6M in net revenue for the year, implying a deficit of roughly $7M.

According to the protocol, finishing 2026 without a loss would require an average ETH price of around $2,850 in the second half. To balance its books sustainably with its current cost structure, Lido estimates it would need ETH around $2,500, a price level we have only seen for a few weeks. At the Lido Poolside Tokenholder Update, Lido also confirmed a negative third quarter.

Finally, the DAO’s treasury (excluding LDO) has tracked the price of ETH. It went from $157.5M at the end of 2025 to $88.3M as of June 30, a 44% drop driven largely by the decline in the value of assets held in ETH and stETH. With ETH back at $2,441, it stood at around $121.3M on August 25.

The State of the LDO Buyback

Today, 2 buyback programs coexist around Lido: the stETH/LDO accumulation program, approved last April, and NEST. In practice, the LDO bought back is not burned; it is simply sent to the DAO treasury, which can reuse it later.

stETH/LDO Program

The first mechanism Lido put in place is a one-off program, funded directly by the DAO treasury. Proposed on March 27 by the Lido Ecosystem Foundation’s operations team, the stETH/LDO accumulation program starts from a simple premise: according to Lido, the price of LDO was far too low relative to ETH, and unjustifiably so.

To give you an idea, at the time of the proposal, LDO was trading around 0.00016 ETH, a 63% discount to its 2-year median (0.00043 ETH). Yet over the same period, the protocol’s net rewards had only fallen by about 20%, while the LDO/ETH ratio had been cut in half. Better still, the DAO’s share of staking rewards had risen from 5% to 6.11%. In short, in Lido’s view, the market was punishing LDO far more than the protocol’s performance warranted.

To “rebalance” LDO’s price toward what could be considered fair value, the proposal aims to buy it back with stETH rather than stablecoins. The logic holds up: the valuation gap lies in the LDO/ETH pair, which is why buying LDO with stETH amounts to swapping an asset trading at a “fair” price for another deemed undervalued.

In practice, the DAO voted to convert up to 10,000 stETH from the treasury into LDO, in batches of at most 1,000 stETH via limit orders or DCA, given the token’s fairly thin liquidity. The idea, as you will have gathered, is to avoid triggering overly sudden price moves in the token. Before each batch, a price ceiling is published on the forum, and LDO holders have 3 days to block the operation.

So how has the program performed so far? According to the H1 report, the first 2 batches swapped 1,591 stETH for 10.03M LDO, at an average price of about $0.30, or $2.99M spent. Lido estimates that these purchases removed 10M LDO from circulating supply, about 1% of total supply.

According to DefiLlama data, the treasury had received a total of 19.42M LDO as of October 19, for about 2,996 stETH, or 30% of the authorized envelope and roughly $6.3M at prices on receipt. A 4th batch is currently being executed at the time of writing.

Keep in mind that this program draws on the existing treasury and therefore does not depend on revenue generated over the period. That is precisely what allowed it to keep running even while the DAO was in the red in the first half.

NEST

Lido has also introduced “NEST,” an automatic buyback mechanism launched in August 2026. Unlike the stETH/LDO program, NEST depends entirely on Lido’s staking revenue and is designed to run automatically.

More specifically, when the DAO’s staking revenue exceeds $40M on an annualized basis, half of the daily surplus is used to buy LDO on the market, up to $50,000 per day and $10M per year.

In practice, each day, NEST compares the DAO’s staking revenue with a threshold of about $109,000 ($40M divided by 365), then adds half of the difference to a running balance. As long as that balance is positive, NEST buys LDO every day, within the caps.

The problem is that the $40M threshold has literally never been reached on an annualized basis, and the cumulative deficit keeps growing. It cuts both ways: on days when revenue falls short of the threshold, the difference is negative and the balance shrinks, until it eventually dips below zero.

As a result, NEST has not bought back a single token since it was deployed. And at the time of writing, the deficit stood at $601,370 as of October 19, according to DefiLlama data.

According to Lido’s H1 report, ETH would need to be around $2,730 for staking revenue to reach the threshold, assuming constant market share and staking rate. And even above that price, the surplus would first go toward clearing the deficit before any purchase is made. Lido acknowledges this itself in the same report, stating that buybacks are “not expected anytime soon.”

In short, NEST is completely unproductive as it stands, which is why the mechanism is quite likely to be revised as part of the 2027 budget. In fact, with the end of the year approaching, some discussions on the topic have already emerged on the forum. A proposal from a DAO delegate aims precisely to align the NEST threshold with the annually voted budget.

In concrete terms, the idea would be to cut this budget by about 30% in 2027, to nearly $30M versus $43.8M today. Every dollar not spent by the foundations would thus become a dollar available for buybacks. According to simulations presented by the delegate, under the current budget NEST would have only a 36% chance of making at least one purchase in the next 12 months, versus 89% with a $30M threshold.

The delegate also asks that LDO bought back by NEST not be used to compensate contributors, and that the DAO publish its quarterly reports faster. Longer term, he envisions plugging other revenue streams into NEST, then dedicating 75% of quarterly profit to buybacks.

On Lido’s side, a contributor agreed on October 9 to the principle of aligning the threshold with the budget and writing this link directly into the 2027 budget request put to a vote. However, he did not commit to the size of the cut, which he says must come out of detailed planning.

Meanwhile, some members are calling for the bought-back LDO to be burned rather than held in the treasury, which would remove about 1.7% of LDO held outside the treasury each year under a budget cut by 30%. Another member considers $30M in annual spending to still be “simply too high” and proposes capping spending as a percentage of revenue.

Ultimately, NEST is a sound idea at its core (as we have always said, buybacks have now become a basic guarantee of alignment between a protocol and its users), but it needs to be rethought.

Our Take

To recap, Lido’s last 3 products are struggling to win people over. Earn shows an ARR of around $1.9M against an $8M target, stVaults have reached less than a quarter of a target that had already been revised down, and Wisp has, according to the latest figures published by Lido, about ten paying subscribers. In the first half, Earn and the “New Bets,” where Wisp is accounted for, cost the DAO around $2.2M for just $0.23M in net revenue (excluding Kelp).

Of course, we have to be fair: the crypto market’s struggles this year and the distrust of DeFi following the KelpDAO attack, which wiped out nearly half of Aave v3’s TVL in 12 days, did not help. But with numbers this far from the targets, it seems legitimate to ask whether launching a 4th product, at the DAO’s expense, makes sense.

We are witnessing a paradox here, since GOOSE-3 was supposed to develop new revenue verticals to make the protocol more resilient to the market and less dependent on Ether, which fueled its success in its golden age.

Yet with the exception of Wisp and EarnUSD, all of these products generate ETH-linked revenue and are therefore exposed to the same volatility as staking revenue. Lido is diversifying its products, granted, but not really its risk. And the only truly uncorrelated product, Wisp, is also the one furthest removed from its core business, and incidentally the one performing worst so far.

And yet Lido Lend is probably the most relevant of this entire range of innovations for the protocol. Once again, the KelpDAO / LayerZero incident showed us how far contagion can spread when assets stuck in leverage loops are hit, and Lido Lend aims precisely to address that. By making stETH safer to use as collateral, Lido protects its core business while strengthening its historical business model.

The catch, however, is that Lido Lend arrives at the worst possible time: the DAO lost $4.45M in the first half, expects a deficit for the year unless ETH averages around $2,850 in the second half, and the NEST program has yet to buy back a single LDO. Since buybacks and the foundations’ budgets draw from the same treasury, the room for maneuver has become particularly narrow.

At its core, then, Lido Lend is not necessarily one initiative too many. But after 3 products that missed their targets, Lido finds itself in an uncomfortable position and still has to prove that this initiative will be the right one. The GOOSE and EGG proposals, expected around the end of November, will show whether Lido has learned the lessons of 2026.

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