Lido Community Approves Full Loss Coverage for EarnETH Users

The Lido community has officially approved a proposal via Snapshot vote to activate a first-loss protection mechanism for EarnETH positions. This decision follows a security incident involving the Kelp protocol, which saw the value of certain assets fall below the parity threshold. Through this mechanism, Lido ensures that all financial discrepancies faced by EarnETH users will be fully covered, marking a significant step in the final stages of the Kelp incident recovery process.

Strategic Recovery and Asset Liquidation

In a coordinated effort to stabilize the ecosystem, Lido has already executed the transfer of 2,500 stETH to the "DeFi United" rsETH bailout plan. This action is part of a broader strategy involving Aave, where the attacker's rsETH positions were successfully liquidated. The resulting collateral from these liquidations has been secured by the Recovery Guardian, ensuring that the funds are held safely during the restoration phase.

• Lido transferred 2,500 stETH to support the rsETH bailout plan.
• The Aave recovery plan facilitated the liquidation of the attacker's collateral.
• The first-loss protection mechanism specifically targets positions that dropped below the 1.0 threshold.

Resumption of EarnETH Treasury Operations

As the remediation efforts conclude, Lido has confirmed that the EarnETH treasury is scheduled to resume normal operations. This includes the reopening of deposits and withdrawals, which had been temporarily suspended following the exploit. The restart is contingent upon the unpausing of the Kelp protocol, which is expected to occur shortly as the final technical audits and security checks are finalized.

The first-loss protection mechanism is a risk-mitigation tool designed to absorb initial financial hits, protecting retail liquidity providers from the immediate impact of protocol-level depegging or exploits.

The Lido community has approved through a Snapshot vote to enable the first-loss protection mechanism for EarnETH positions below the 1 threshold, and EarnETH user losses will be fully covered by this mechanism.

The successful resolution of the Kelp incident highlights the growing maturity of Decentralized Finance (DeFi) governance. By utilizing on-chain voting and cross-protocol collaboration between Lido, Aave, and Kelp DAO, the ecosystem has demonstrated its ability to protect user capital without relying on centralized intermediaries. Investors are advised to monitor official channels for the exact timestamp of the treasury's reactivation.