🛡️ Lido Resolves KelpDAO Crisis
🛡️ Lido Resolves KelpDAO Crisis
🛡️ Crisis Averted
KelpDAO Exploit Resolution Complete
A LayerZero bridge exploit left rsETH underbacked by over 100,000 ETH, directly impacting Lido's EarnETH vault with approximately $20M in rsETH exposure.
Community Response
- The 'DeFi United' initiative successfully raised 132,000 ETH to address the rsETH shortfall
- Lido DAO contributed 2,500 stETH to the recovery effort
- EarnETH's first-loss protection mechanism burned 144 ETH to fully cover user funds
Current Status
After 27 days of being frozen, the EarnETH vault is now operating normally. All affected users have been made whole through the combined efforts of the DeFi United initiative and Lido's protection mechanisms.
The incident demonstrated the effectiveness of Lido's first-loss protection framework and the broader DeFi community's ability to coordinate recovery efforts during protocol exploits.
More information and next steps can be found here: research.lido.fi/t/lido-dao-con…
3/ EarnETH has exposure to other assets and looping strategies that are independent of rsETH. The vault curator has been working to deleverage positions that are affected by elevated borrowing rates on lending markets and optimising the vault holdings. Fast reaction puts the
KelpDAO Exploit Impact • The LayerZero bridge exploit left rsETH underbacked by 100,000+ ETH. • Lido EarnETH vault had ~$20M of direct rsETH exposure. • The 'DeFi United' initiative raised 132K ETH to recover the rsETH bad debt. • Lido DAO contributed 2,500 stETH to the
Kelp Incident Review: EarnETH Exposure, Response, and Risk Framework Changes research.lido.fi/t/kelp-inciden…
The Snapshot vote to authorize Lido EarnETH loss coverage below the 1% threshold is now live. snapshot.box/#/s:lido-snaps…
A proposal for the Lido DAO to temporarily lower the threshold for first-loss coverage protection for the EarnETH vault is live on the Lido Research Forum. research.lido.fi/t/authorise-lo… In its current state, Lido EarnETH protection is only triggered when vault losses exceed 1% of
The Lido Earn first-loss protection mechanism has now been actioned following the updating of the rsETH exchange rate. The transaction can be found here: etherscan.io/tx/0xdfca0390d…
[Update on EarnETH and the Kelp Incident] The unpausing of the Lido Earn EarnETH vault is complete and users can now deposit and withdraw as normal without restrictions.
6/ Lido DVV, GGV and EarnUSD vaults have no exposure to Kelp’s rsETH. Lido DVV and EarnUSD also have no exposure to the lending-market liquidity issues. These vaults are performing as intended and depositor rewards are unaffected. Withdrawals and deposits are proceeding as
Last week, the 2,500 stETH dedicated to the rsETH relief effort as part of ‘DeFi United’ was transferred. The full details of the transaction can be found here: x.com/LidoFinance/st…
The vote to authorize a one-time, 2,500 stETH contribution towards the rsETH relief effort has been approved and the stETH has been forwarded to the 'DeFi United' relief vehicle under the proposed mandate. dao.lido.fi/vote/200
7/ The Lido GGV subvault has exposure to looped staking strategies. In combination with the ongoing spike in borrowing rates, the subvault is currently experiencing negative yield rates. Regular curator actions are being taken to reduce the impact. Users who submitted withdrawal
For those who choose not to migrate or withdraw, dvstETH will continue to earn staking rewards powered by the Lido protocol. The change will take effect at the end of April. DVV incentives will continue until then.
1/ [Update on Lido Earn vaults and the ongoing Kelp incident] Lido Earn contributors are working with the vault curators (Veda and Mellow) to resolve two distinct issues arising from the Kelp incident: direct exposure to rsETH, and an ongoing liquidity crunch on lending markets.
[Update ongoing Kelp incident] Last Thursday Lido contributors shared a proposal to contribute 2,500 ETH to @aave’s coordinated rsETH relief effort. Over the past three days, DeFi United has raised more than 100,000 ETH to improve the backing of rsETH and normalize market
A proposal for Lido DAO to contribute to @aave’s coordinated rsETH relief effort has landed on the Research Forum following this week’s Kelp's rsETH LayerZero bridge exploit. The proposal authorizes a one-time, capped contribution of up to 2,500 stETH to a dedicated relief
2/ Which Lido Earn vaults have exposure to rsETH? Only Lido EarnETH has rsETH exposure, at ~9% of the vault’s TVL. EarnETH vault deposits and withdrawal processing are currently paused by the vault curator while the resolution process is finalized. The Arbitrum Security Council
In summary, EarnETH users will benefit from the first-loss protection mechanism - losses will be absorbed through the DAO’s position. After this, the EarnETH vault will continue to operate as normal.
[Lido Earn Disclosure] The Lido Earn team is aware of the developing situation with the Kelp DAO exploit. earnETH has exposure to rsETH. As a precaution, further deposits into earnETH have been paused while the situation is assessed alongside relevant partners. We will share
While EarnETH deposits are paused as the Kelp incident resolution is being finalized, dvstETH holders can: • Stay in the DVV and continue earning Lido staking rewards • Withdraw their position at any time Once EarnETH deposits reopen, migration will be available again.
The Lido first-loss protection mechanism for EarnETH has been DAO-approved and will be actioned following the exchange rate update. The first-loss protection mechanism is estimated to be actioned at 17.30AM CET on May 15. In practice this will function as an EarnETH vault token
EarnETH users can now expect a short waiting period before EarnETH user funds are unfrozen, at which point losses are covered as per the first-loss mechanism.
Update on Ongoing Kelp Incident - EarnETH first-loss protection coverage below 1% threshold has been approved - stETH transferred to DeFi United relief initiative - Attackers rsETH has been liquidated - EarnETH vault operations to resume as soon as Kelp protocol is unpaused ↓
[DVV Migration Reminder] DVV incentives for dvstETH holders will continue until the end of April. After that, only staking rewards powered by the Lido protocol will be allocated to the DVV vault users. x.com/LidoFinance/st…
[DVV Migration Notice] Following the latest Snapshot vote, the DAO has approved redirecting DVT incentives from the Decentralized Validator Vault (DVV) to Lido Earn strategies. If you’re a DVV holder: • Migrate to EarnETH to maximise your rewards • Or withdraw your position
Update on EarnETH & the ongoing Kelp Incident: • The rsETH exchange rate needs to be updated to unpause vaults • First-loss protection was approved by the Lido DAO; to be activated following the exchange rate update • No losses will be suffered by any EarnETH user ↓
The Snapshot vote to authorize EarnETH protection coverage below the 1% threshold has reached quorum. As such, losses incurred by EarnETH users will be fully covered by the Lido Earn first-loss mechanism. snapshot.org/#/s:lido-snaps…
The first-loss protection mechanism functions as an EarnETH vault token share burn from the Lido DAO’s EarnETH position, used to absorb EarnETH user losses associated with the Kelp incident. More details on the first-loss protection mechanism can be found here:
Concurrent with the DeFi United effort to address rsETH deficits and market dislocations, Lido Earn contributors, @mellowprotocol contributors, and the @ethereumfndn reached an agreement last Friday to bilaterally swap ~21,269 aWETH to wstETH. x.com/ethereumfndn/s… This swap
0/ Today, the Ethereum Foundation completed a bilateral swap of ~21,269 aWETH to wstETH, coordinated with @LidoFinance and @mellowprotocol as part of their ongoing deleveraging work.
4/ If EarnETH ends up suffering a loss upon resolution, EarnETH's “first-loss protection mechanism” ($3M, funded by the Lido DAO treasury) will be applied by burning the DAO’s vault shares. research.lido.fi/t/lido-earn-co…
4/ EarnETH's “first-loss protection mechanism” ($3M funded by the Lido DAO treasury) will be applied if needed to cover vault losses by burning the DAO’s vault shares. The full extent of potential losses and extent to which this mechanism will be used will be assessed by the
The current dependency for unpausing the earnETH vault is the updating of the rsETH exchange rate, which is set to take place 16.30 CET on May 15. Updating the rsETH exchange rate accrues staking rewards built up from the pause period to rsETH holders. x.com/KelpDAO/status…
Quick update: The first tranche of rsETH has been transferred by @aave into the LayerZero OFT Adapter per the coordinated restart plan agreed with Kelp. Bridging is now resumed. Users can move rsETH in and out of L2s from mainnet freely now. 1. rsETH contracts will be
The vote to authorize a one-time, 2,500 stETH contribution towards the rsETH relief effort has been approved and the stETH has been forwarded to the 'DeFi United' relief vehicle under the proposed mandate. dao.lido.fi/vote/200
A proposal for Lido DAO to contribute to @aave’s coordinated rsETH relief effort has landed on the Research Forum following this week’s Kelp's rsETH LayerZero bridge exploit. The proposal authorizes a one-time, capped contribution of up to 2,500 stETH to a dedicated relief
Once complete, Lido Earn users will be able to deposit and withdraw freely across EarnETH. Sufficient liquidity has been prepared by the Curator to service all currently requested withdrawals at the moment of unpausing.
A proposal for the Lido DAO to temporarily lower the threshold for first-loss coverage protection for the EarnETH vault is live on the Lido Research Forum. research.lido.fi/t/authorise-lo… In its current state, Lido EarnETH protection is only triggered when vault losses exceed 1% of
The Lido DAO’s contribution is midway through the Lido DAO governance process. Yesterday, the proposal met quorum and passed the main voting phase. Currently, the proposal is in the ‘objection phase’ before voting ends on Apr 28, 20:09 UTC. Public discussion is underway on the
The Lido Earn EarnETH vault operations are set to be unfrozen in the near future, at which point users will be able to deposit and withdraw as normal. Note that the vaults - both EarnETH and EarnUSD - have continued to earn rewards throughout this period.
[DVV Migration Notice] Following the latest Snapshot vote, the DAO has approved redirecting DVT incentives from the Decentralized Validator Vault (DVV) to Lido Earn strategies. If you’re a DVV holder: • Migrate to EarnETH to maximise your rewards • Or withdraw your position
Lido DAO Approves Protocol Upgrades, Awaits Dual Governance Review
**Lido DAO has approved major protocol upgrades** that will enhance its staking infrastructure. The approved changes include: - Upgrading Community Staking Module (CSM) to v3 - Adding new Curated Module v2 on-chain - Built on Staking Router v3 The proposal is now under **Dual Governance review**. If no veto occurs, the upgrades will be deployed to mainnet. **No action required from stakers** - this is a protocol-level upgrade that will be implemented automatically. The vote passed after a governance window that ran July 15-17. Full details: [dao.lido.fi/vote/203](http://dao.lido.fi/vote/203)
Lido Completes Security Audits for Staking Router v3 and Community Staking Upgrades
Lido has published multiple security audit reports for its upcoming protocol upgrades: **Staking Router v3 & Community Staking V3:** - [Certora audit report](https://github.com/lidofinance/audits/blob/main/Certora%20Staking%20Router%20v3%20Audit%20Report%2007-2026.pdf) - [Statemind audit report](https://github.com/lidofinance/audits/blob/main/Statemind%20Staking%20Router%20v3%20Audit%20Report%2007-2026.pdf) **Easy Track Factories:** - [MixBytes audit report](https://github.com/lidofinance/audits/blob/main/MixBytes%20Lido%20Easy%20Track%20Factories%20(SRv3%20CSMv3%20CMv2)%20Security%20Audit%20Report%2007-2026.pdf) **Off-chain Oracle:** - [Composable Security consultation report](https://github.com/lidofinance/audits/blob/main/Composable%20Security%20Lido%20Oracle%20V8_0_2%20Security%20Consultation%20Report.pdf) Staking Router v3 introduces reallocated stake via consolidations, large validator deposit support, and streamlined validator management for improved protocol efficiency.
Lido Core Upgrade Completes Dual Security Audits
Lido has completed security audits for its Core upgrade, maintaining its standard practice of dual independent reviews. **What was audited:** - Smart contracts - Governance components - Off-chain infrastructure The protocol continues its track record of rigorous security practices, having conducted over 100 audits throughout its history with no user funds lost to date.
Aave Raises Supply Cap to Enable New Strategy
Aave has increased its supply cap to support a new strategy implementation. **Key Changes:** - Higher deposit limits now available for users - Additional allocation space created for new positions - Cap adjustment follows previous capacity increases in April This expansion continues Aave's pattern of gradually scaling supply and borrow limits as demand grows. Users can now deploy larger positions within the protocol's updated parameters.
EarnUSD Launches PT-srUSDe Loop Strategy with Fixed Yields
EarnUSD has introduced a new strategy allocation featuring PT-srUSDe loops. The approach combines: - Fixed-yield principal tokens (PT) on Strata Markets' senior sUSDe tranche (srUSDe) - Looping mechanism on Aave with boosted leverage through Twyne - Powered by Pendle Finance infrastructure The strategy offers a fixed rate return with first-loss capital protection underneath. This builds on previous integrations where PT srUSDe gained support for 1-transaction looping, unwinding, and position optimization on DeFi Saver.