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Lido said its exposure to the Kelp incident was limited to its EarnETH vault, where the affected rsETH position represented about 9% of the vault’s total value locked (TVL). The broader Lido staking protocol was described as outside the event. Lido also said about $70 million in ETH tied to the attack has already been recovered through remediation efforts, while vault curators continue work on asset recovery and lending-market stress.
Lido said the Kelp incident created two distinct issues for Lido Earn vaults: direct exposure to rsETH in one case, and a liquidity crunch in lending markets that raised borrowing costs for looped strategies in another. The core Lido staking protocol was described as not involved, and Lido said stETH and wstETH remain unaffected.
According to the update, only the EarnETH vault had direct exposure to rsETH. The affected position accounted for about 9% of EarnETH’s TVL. Deposits into EarnETH and withdrawal processing have been paused by the vault curator while the resolution process continues.
Lido said the Arbitrum Security Council recovered about $70 million in ETH resulting from the attack. Separately, Lido Labs proposed allocating up to 2,500 stETH (worth about $5.8 million) to help reduce the rsETH deficit created by the Kelp exploit. Lido said the contribution would be made only as part of a fully funded recovery package.
Lido said EarnETH also holds positions beyond rsETH, including looping strategies that were affected by a jump in borrowing rates across lending markets. The update said the vault curator has been working to reduce leverage and adjust the composition of holdings.
Lido stated that fast action placed the EarnETH vault in a more favorable position, including a major reduction in wETH debt positions. The measures were intended to manage elevated borrowing costs and ease pressure from stressed lending conditions. Further communication on progress is expected as the resolution process advances.
If the resolution takes materially longer than expected and withdrawal processing remains paused, Lido said an alternative withdrawal path may be introduced.
Lido described a first-loss protection mechanism tied to the EarnETH vault. If the vault records a loss after the recovery and resolution process is completed, a $3 million buffer funded by the Lido DAO treasury would be applied. Lido said the buffer would be executed by burning the DAO’s vault shares.
Lido said the arrangement is intended to place DAO-funded capital in front of users if a final shortfall remains. It was presented as part of Lido Earn’s trust and treasury framework, including DAO oversight and treasury allocation. Any use of the buffer depends on the outcome after recovery actions and loss allocation are complete.
Lido said DVV, GGV and EarnUSD vaults have no exposure to Kelp’s rsETH. It also said DVV and EarnUSD have no exposure to the lending-market liquidity issues linked to the current stress. Deposits and withdrawals for those vaults are continuing as usual, and depositor rewards remain unchanged.
For the GGV subvault, Lido said there is exposure to looped staking strategies. Combined with the spike in borrowing rates, the structure has pushed the subvault into negative yield territory. Curators said they are taking regular actions to reduce the effect of those conditions while the lending-market crunch persists.
Lido said users who submitted GGV withdrawal requests before the liquidity crunch will be redeemed at pre-incident valuation. Requests submitted later will be served once the liquidity crunch is resolved.
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