Lido has introduced a secondary layer of protection for its EarnETH and EarnUSD vaults, effective November 5, 2026. The protocol now utilizes Firelight as the primary buffer against eligible losses, with the existing Lido DAO safety net acting as a secondary mechanism.
Firelight coverage is subject to capacity limits that reset every 30 days. For the initial period, the cap for EarnETH is set at 5.7% of the total value locked, equivalent to approximately $12.1 million. The cap for EarnUSD is 8% of its total value locked, or roughly $4 million.
The Lido DAO previously allocated $5 million in March 2026 to serve as first-loss capital for these vaults, consisting of $3 million in wstETH and $2 million in USDC. This treasury capital will now only be utilized if losses exceed the capacity provided by Firelight.
The EarnETH and EarnUSD vaults, managed by Mellow, were launched in March 2026. The DAO's protection mechanism was previously tested during the Kelp DAO incident in April and May 2026, where it successfully prevented losses for EarnETH depositors.
