Share
Lido has added a new layer of protection to its EarnETH and EarnUSD vaults. Starting November 5, 2026, depositors in those products are covered by two separate buffers against losses instead of one.
The first buffer comes from Firelight, an onchain protection protocol. Lido DAO’s existing protection, which until now was the only cushion, moves into second position.
How the two layers stack up
Under the new setup, Firelight steps in first when a vault takes a hit. It absorbs eligible losses up to set capacity limits, and those limits apply over each 30-day period.
If a loss blows past what Firelight can cover in that window, Lido DAO’s protection mechanisms pick up the remainder.
For the opening 30-day period, Firelight’s coverage is capped at 5.7% of EarnETH’s total value locked, which works out to approximately $12.1 million. On the stablecoin side, the cap sits at 8% of EarnUSD’s TVL, or roughly $4 million.
Those caps are expressed as a share of TVL, so the dollar ceiling depends on how much capital sits in each vault. Coverage resets every 30 days and applies at the vault level rather than to individual wallets.
Firelight itself is built on the Flare Network.
The crypto and markets news you actually need—every morning.
Daily. Free. Join 34,000+ readers across crypto, finance, and policy.
We respect your privacy. Unsubscribe anytime.
Where the DAO’s money comes in
Back in March 2026, Lido DAO approved a $5 million treasury allocation to serve as first-loss capital for these vaults. That pool was split between the two products. EarnETH received $3 million in wstETH, while EarnUSD got $2 million in USDC.
When losses occur, the DAO’s own vault shares are burned to absorb them, so depositors are made whole before the treasury’s stake is.
Now Firelight takes that seat first. The DAO’s $5 million only gets tapped once Firelight’s capacity for the period runs out.
The EarnETH and EarnUSD vaults are curated by Mellow. Both launched in March 2026 as part of Lido’s push to expand its Earn product lineup beyond plain staking.
The Kelp DAO test run
Lido’s protection setup has already faced a live stress test. During the Kelp DAO incident in April and May 2026, Lido DAO activated its first-loss mechanism.
The result: EarnETH depositors did not suffer losses from that event. The DAO’s capital did the job it was set aside to do.
What this means for depositors
For people holding EarnETH or EarnUSD, the practical change is simple. There is now more capital standing between their deposits and a loss, at least up to the stated caps in any given 30-day window.
The protection covers eligible losses only, and the caps are fixed percentages of TVL. The 30-day reset means coverage replenishes on a schedule, which helps against repeated smaller hits, but the protection is sized per period, not as an open-ended guarantee.
Adding Firelight means EarnETH and EarnUSD depositors now rely, in part, on a protocol running on the Flare Network to honor its coverage.
