Lido Proposes Development Of NEST Mechanism For LDO Buybacks
In Brief
Lido Finance has proposed the NEST modular mechanism, which enables stETH-to-LDO swaps for buybacks, redirects LDO to the DAO Treasury, and formalizes surplus allocation.
Decentralized finance (DeFi) platform Lido Finance, which provides liquid staking solutions for proof-of-stake blockchains such as Ethereum, has put forward a proposal concerning the approval and further exploration of a NEST modular mechanism.
The mechanism, when supplied with stETH, allows those tokens to be exchanged for LDO through STONKS, with the resulting LDO redirected to the Lido DAO Treasury and removed from circulation. This process effectively alters the distribution of governance rights among token holders, including influence over future decisions on value allocation.
The proposal remains open for voting until September 29th, with current results indicating a majority in favor of approval.
NEST introduces a modular framework designed to enable LDO repurchases while offering programmatic enforcement guarantees for token holders in the long term. The current version requires Aragon DAO votes to determine the specific amounts of stETH deposited into NEST for activation, with the potential for future automated modules to supply stETH under alternative parameters. Any stETH placed in NEST must be linked to at least one STONKS Cowswap order approximately every 7,000 blocks, or once per day.
The maximum order size is configurable through an Aragon DAO vote and is intended to prevent slippage above 1% per transaction. Execution of a STONKS order provides the initiating address with a reward equal to 2 basis points of the order size in stETH before execution. These parameters remain subject to adjustment in line with market conditions closer to deployment.
NEST: Unveiling Modular Surplus Allocation Mechanism For Enhanced Governance And Flexibility
The mechanism is designed to formalize surplus allocation, offering programmatic and optimistic execution that provides stronger assurances compared to ad-hoc token holder votes, which remain possible under the current framework. It preserves the central role of LDO, as delegates and voters retain the authority to amend parameters, suspend allocations, or remove NEST entirely from the protocol. The system is structured to integrate with other tokenomics adjustments, distribution frameworks, or one-off surplus allocations, effectively modifying the governance weight and claim each token represents.
The proposal outlines a modular architecture with capacity for future extensions to supply stETH into NEST, with any deposits ultimately converted into LDO and directed to the DAO Treasury. Potential modules could include automated mechanisms that transfer surpluses exceeding predefined thresholds or use oracle-based price data to determine allocation limits, such as restricting transfers when the LDO/ETH rate falls below historical averages. Additional one-time surplus distributions could be authorized through Aragon votes, and a reverse-flow version of NEST could be introduced in scenarios where issuing LDO for stETH is warranted by elevated LDO/ETH multiples.
The initiative does not require additional funding for 2025 beyond what has already been allocated under the Lido Labs BORG Foundation Grant Funding Request for April to December 2025, with any future funding to be addressed in subsequent Lido Labs grant proposals.
The current proposal seeks approval of the concept and permission to conduct further research and design, without implying endorsement of specific parameters or the start of distributions. A follow-up proposal detailing final designs and implementation plans will be submitted after the technical evaluation, expected within six months, and will require DAO approval, with the ultimate release subject to an on-chain Aragon vote.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
