Lido stVaults and Earn: Staking Infra That Powers DeFi Yields

Transcript

Okay everybody. Um Welcome. Uh thanks for coming to my talk. I'm going to talk about Lido ST Vaults uh and Lido Earn. So, basically, how these two products from Lido come together to create staking infra that powers DeFi yields regardless of whether you're a retail user or an institutional user. Um Really quickly about myself, my name is Izzy. Uh I'm the Chief of Staking at Lido Ecosystem Foundation, and I've been contributing to the Lido DAO for the last 5 years. Uh really, really quickly, before we jump into the timeline of like the evolution of Lido, just to give you guys some context for those of you that don't know, Lido is a liquid staking protocol on Ethereum and now also a a newly DeFi yield protocol under the name of Lido

Earn. It is the largest staking solution on Ethereum apart from, you know, native staking uh with approximately 25% of all staked ETH flowing through uh the Lido protocol, and it is a non-custodial >> [clears throat] >> uh maximally decentralized at at that scale as as uh that scale allows um staking protocol. So, I'm going to guide you guys a little bit through the the three phases um and the history of of the Lido protocol, give you guys a little bit of context to understand how it works, and how this basically sets the stage for institutional adoption of Ethereum of staking and of of DeFi going forward.

So, when Lido launched in December of 2020, so right uh after the genesis of of the beacon chain, it kind of launched with an objective to offset what people foresaw as the incoming risk of staking becoming centralized by um very large staking providers, namely decentralized exchanges that were already super primed to to offer staking services to users. So, it wanted to do so in a way that allowed it to approach the market in like a very appealing manner, and by making some concessions on the decentralization front that would basically allow it to scale uh at least initially so that it would provide a meaningful uh rebuff against, you know, the the threat of centralized staking.

So, it did that by launching with a single permissioned or curated node module where basically the DAO was selecting node operators, and started with five node operators, and over the course of those first 3 years um blossomed to 39 node operators, uh and it did so by essentially targeting becoming the most liquid liquid staking token out there. So, aiming for integrations, allowing people to to utilize this this staking token as if withdrawals, you know, had been implemented. They wouldn't be implemented for another 3 years. Um in fact, like, you know, Ethereum hadn't even had the merge yet. And so, there was a lot of risks and and um anxiousness that staking protocols kind of like needed to overcome in terms of appealing to users. So, the objective was a one-size-fits-most Ethereum staking solution, decentralized

enough to scale, but also to rebuff the advances of a centralized staking. And that leads us to the second phase. So, essentially after the merge and the introduction of withdrawals with the Shanghai fork uh in in 2023, Lido moved into a multi-modular architecture, and essentially, this allowed the protocol to add um annexes to itself, and those annexes allowed node operators to join the protocol in in different ways. So, it went from a curated-only approach to uh a protocol that allowed distributed validator setup and also permissionless setups. So, as of uh I think 2 months ago, the permissionless module in Lido, the community staking module, is actually the largest staking solution on Ethereum in terms of ETH staked. It

surpassed even Rocket Pool. And so, it went from 39 node operators to over 700 right now running in a variety of different community configurations from permission to to non-permission with best-in-class withdrawal support. So, basically, Lido processes hundreds of thousands of ETH of of withdrawals like as fast as any other protocol essentially can, and sometimes even faster than native Ethereum can due to the way that its its deposit buffer works. And the withdrawal support is so good that a lot of integrators like LRTs actually use Lido's withdrawals to service most of their user withdrawals before they they um accept their own ETH.

Uh and then, of course, there was the introduction of dual governance in the summer of 2025, which is, I think, a best-in-class feature in terms of DeFi protocols that really no other protocol offers, and it allows the users of the protocol, STETH users, to potentially delay or veto proposals that they they don't agree with. And it allows them to do so in a way that allows them to then ragequit or exit uh and withdraw their funds in light of a potential governance decision that they don't agree with, whether that's like benign or whether it's, you know, possibly malicious. So, the objective has kind of morphed from acceptable decentralization to maximal decentralization at scale, and becoming essentially the most robust base layer for a a ridiculously large amount of stake to be run in a safe and robust

manner on Ethereum. And that leads us to phase three. So, at the end of last year in in the winter of 2025, we launched Lido V3 and ST Vaults, and essentially, we've moved from the one-size-fits-most model to a model that allows for tailoring stake um how stake is run to any way that any user wants to do that. Now, whether that's a discerning retail user or institution or custodian or large capital allocator, they can run the stake the way that they want using ST Vaults and still get access to the liquidity and the benefits that STETH provides, and I'm going to talk a little bit more about that later. So, we've morphed from a one-size-fits-most solution to uh a protocol of an infrastructure layer that essentially allows people to run staking however they want and still get access to STETH.

So, really quickly taking a look at STETH and and how well entrenched it is within DeFi, uh approximately half the TVL of the protocol, around $10 billion, is actually used as collateral within centralized finance. Uh there's over $150 million on average on a 30-day basis um STETH trading volume, and $75 million worth of liquidity at a 2% depth um across decentralized exchanges and centralized exchanges. And here's like the obligatory logo slide with a bunch of all the different cool integrations that that STETH affords. So, let's double-click on on ST Vaults and what sets it apart from Lido Core, which is the Lido that that we all know. So, ST Vaults are essentially a mechanism that allows people to build custom staking solutions um to to cater to the demands

of whatever the customers are or the users are. So, traditionally, when you staked ETH with Lido, the protocol in an algorithmic way decided how to allocate that stake across those over 700 node operators that that utilize the protocol. ST Vaults kind of like flips this model on its head, and it says, if you're a user that only wants your stake to be run in a certain way, whether that's with a specific node operator or a set of node operators that fulfill certain criteria, but still get access to STETH, ST Vaults allow you to do this. And it allows you to do this in a way that is then further composable. So, you can take your your stake in ST Vault, you can mint STETH against it, and then you can take this STETH and you can use it in in DeFi, which is really something that no other staking solution

can afford because nothing else mixes this tailored ability to run stake any way that you want with the the DeFi um accessibility and utility that STETH brings. Um so, this is kind of like a slightly detailed example of the comparison between how Lido Core works and how Lido ST Vaults work. So, if you look at the top, uh the the bog-standard approach is like you can take 100 ETH, you put it in the Lido Core, you get 100 STETH back. Uh there's no kind of um worrying about how that stake gets allocated, do I have a relationship with a node operator? The protocol abstracts all of that complexity and all of that decision-making away, but some users don't want that, or some users want to be able to build products um that offer more uh solutions to that. So, if you're

a node operator or your custodian, you basically want to offer a very specific product, you can't really do it that way, and that's why ST Vaults were created. So, with ST Vaults, you can have a user or or a pool of users that put together 100 ETH, and then they can decide, how much of this ETH do we want to mint as STETH? Let's say that you have like an exchange-traded fund, and you only want to mint STETH in order to service redemptions, then you can reserve the right to mint 20% of that vault as STETH and then use it for redemptions. Or, you can reserve the right to mint 80% of that vault as STETH and perpetually use it in DeFi, and that will allow you to layer DeFi yield on top of your your staking yield that you're already doing in a compliant um

and and regulatory safe manner. So, especially on the institutional side, ST Vaults basically afford this idea of staking with optional liquidity that you can't do in in a native manner, and you to be honest, you can't really do with any other liquid staking protocol because they're mostly not liquid. So, you have ST Vaults, they allow you to pick your validator or your node operators, you they allow you to pick how the validators are run, whether you want them to use advanced infrastructure or run their validators all all over the planet or use distributed validator technology. They even allow you to, you know, pick multiple node operators that might be working in concert, and then they allow you to make decisions around how much STETH will you melt and mint, sorry, when will you mint it, and how will you use it. And that's definitely something that that wasn't possible

until now. And on top of that, there's also solutions that cater towards builders, like off-the-shelf tooling that allow you to launch um products to help you hit the ground running. So, uh in the screenshot, we see an example of what we're calling DeFi Wrapper, and it is essentially a white-label one-click solution to be able to launch a mini Lido, if you want to think about it this way, that is run exclusively uh by a specific subset of node operators. So, let's say uh that you're a large node operator in the Latin Americas, and you're working with institutional clients there, and you want to offer like a tailored mini Lido where people can can put in ETH and they get in out STETH, and that STETH can then be attached to a set of DeFi primitives or DeFi strategies and automatically gain yield on that. So, this uh DeFi Wrapper

allows you to do that, and it's basically like a three-click solution. It'll deploy the on-chain contracts for you, it'll deploy the back-end services, and it'll also deploy a white-label front end that you can tailor to meet um your own personal demands, like the the way that your branding works, um and all those different things, whether you have additional kind of like um IT compliance that you need to meet. And this is an example of builders that are already building on top of ST Vaults. So, we have Obol that is working together with multiple client teams to build a distributed um ST Vault. We have Northstake that has built a platform on top of ST Vault as a platform catering towards institutions and custodians and basically offering the ability to pick institutional friendly node operators and and run

stake anyway that you see fit potentially across multiple ST Vaults and multiple node operators. We have Peer 2 and Rock Solid that have built a D5 Vault that allows for looping directly and essentially all of the complexity and health management of D5 positions abstracted away for users. We have Solstice that is building uh one of the first kind of like cross-chain Vaults. Solstice have a stablecoin running on Solana and they will they will essentially be using the ST Vaults on the Ethereum side as collateral to mint stables and get yield on the Solana side. And then a lot of other node operators that are also creating their own products whether they're retail focused or institutional focused or perhaps even sometimes just kind of like whale focused where somebody wants a a stake Vault that is only theirs

so that they're not kind of like mixing funds with with the wider public and now ST Vaults allow you to do that. A little bit earlier I was talking about how with ST Vaults now you can actually have access to D5 yields on top. And traditionally the only way to do that was to mint ST ETH. The way that we do that is through offering baked-in integrations with Lido Earn. But let me take a step back and explain what Lido Earn is. So up until the summer of this year the only thing that Lido did was staking. At some point there was a foray to do staking on other chains as well. There was Solana, Polygon, Polkadot, Kusama.

We almost went to Avalanche at some point. It's good thing that we didn't. But what we realized that is that essentially a lot of these markets have kind of like entrenched participants that are very difficult to compete against if you don't have a native token or native like let's say cultural impact in the space. And so we went back and we said okay let's double down on Ethereum. That's where our home is. That's where our values are. But then we started thinking what else can we do? What are the kind of comparative advantages and specialties that Lido contributors and the Lido protocol has? And is there a way for us to export them into other sectors of the industry? And so we thought what if like if we take this user first mindset and the security rigor that we have that permeates Lido, our culture and our DNA,

where else can we extend it? And we figured that the first logical extension is is D5 and D5 yields. And so that's how Lido Earn came to be. In September we essentially launched like uh a pilot if you want to think about it this way or an experiment with three ETH-based Vaults. Why do you need three different ETH Vaults? Like we'll get to that in a in in a little bit. But essentially what we were trying to do here is figure out what infra works and what operations work. We didn't create the Vault infrastructure ourselves, but what we did was we took our security DNA and we said that if there's going to ever going to be like Vaults that are offered via the Lido protocol or adjacent to it they need to meet our security standards and our rigor and our operational precepts around what makes things robust and what

makes things safe. And so we did a little bit of experimentation. We worked with two different Vault providers and curators, Veda and Mellow, with an assortment of different risk strategies. So there was the Golden Goose Vault, there was the Decentralized Validator Vault, and there was the Lido Strategy uh uh Vault which was powered by Mellow. Golden Goose and Lido Strategy were kind of similar. They were the same similar thing done by two different parties in order for us to assess what worked and and what didn't and what worked better. And the Decentralized Validator Vault was like a less risky solution to this where you basically just stake ETH. The ETH gets distributed to distributed validator technology run validators within Lido and then incentives are then routed to to users.

And then we realized okay maybe this is like a little bit too complex and not so user first. And so we did a revamp of Lido Earn. It launched actually in March. I mean we're still in March, sorry. I thought we were going to be in April, but in March of this year. And we basically took those three Earn Vaults and we consolidated them into one product into Earn ETH. Earn ETH is basically a blue chip D5 rewards made simple kind of Vault. You put ETH or ST ETH in and it gets allocated to tried and tested and very well like security audited protocols in the on the Ethereum space both on mainnet and on layer 2s.

And then for the first time we've done something that's not directly ETH related as well. We have the Earn USD Vault. And it's the same thing but with with USD related stables. And what we're doing here is essentially trying to take a more simplified approach but with a broader scope. So what kinds of things can we offer to users where we take the security minded mindedness of the Lido protocol contributors and export it to additional things. So what makes Lido Earn and sets it apart from the other kind of like D5 yield solutions that are out there? So going back to a little bit around the DNA. Security first. So blue chip D5 only audited with conservative strategies. Although maybe not conservative like anymore. We're going to play with this a little bit to see

what ends up making the most sense. But essentially utilizing the modular paradigm again to allow for isolation of strategies. So if one strategy is new and maybe like a little bit more risk on than we were originally envisioning, we can isolate it within like the Earn ETH meta Vault and only scale it up when we feel that it's safe to do so. They're built to be simple and safe for everyone. So no advanced D5 knowledge is required here. You don't need to worry about like maintaining your, you know, health status on the Vaults. It's a one-click deposit both for beginners and advanced users.

And professional curators basically handle all of the complexity and again conform to the operational safeguards that are put in place by Lido contributors. And first foremost of all transparency by design. So it's fully on-chain with public contracts and strategic strategy logic being very transparent. Clear visibility into how funds are allocated, what are the strategies, and how the yield is being generated. And something that has been done before but in my opinion or at least as far as I know not to the scale with real skin in the game. So Lido contributors sorry, LDO token holders approved $5 million DAO treasury allocation into the Vaults.

$3 million for Earn ETH and $2 million for Earn USD respectively to essentially dog food these products. So they're saying we really believe in these products. We we really believe in the security and the robustness of these products. And we're putting our we're not our money but the the DAO's money up first. So as further evidence of skin in this game, not only is the DAO essentially investing DAO funds into these Vaults, but it's also saying if something happens, if there's like a serious incident or if there's a market to market valuation loss of greater than 1%, this allocation will take the hit first. So again, user first DNA permeating how we think about products, how we position them, and the things that we want to do.

If you want to like learn more about this first loss protection, there's a QR code and and you can check that out. So how do these two things come together? You know, you have ST Vaults and now you have Earn. You can essentially think of this as as LEGO blocks, right? The the big unifier here is ST ETH. So ST ETH is probably one of the most integrated tokens in the D5 space apart from like stables and ETH or wrapped ETH itself. And essentially D5 sorry, ST Vaults and Earn allow you to put these two things together and take advantage of it. So you can create your own custom staking solution whether you're a node operator or a custodian or an asset allocator or even an asset issuer. And then you can bake yields into it. And you can choose to use Lido

Earn or you can actually use your own custom strategy. So together with the D5 wrapper that we talked about earlier, there's a connector for custom strategies. You do not have to use Lido Earn, but you you benefit from all of the kind of rigor and thought process that we put around how do you combine staking yield and collateralizing it and enabling you to really get D5 yields which is where we think that a lot of like DATs and institutions will start going to once they realize that just staking is is not enough. So two QR codes also there to learn a little bit more about that. And also feel free to check out our booth if you have questions. We have experts from both Lido Earn and ST Vaults there.

Thank you very much. That's it. And and also tomorrow we have Lido Day. It's like a small side event that we're going to have that's that's a half-day event. If you want to get an invite, come by our booth, play our video game on our custom arcade box made by Galen. Shout out to Galen. And I will give you an invite. Thanks. Any questions? We have 2 minutes. So with the Earn USD Vault that you have, am I right to say like you deposit stablecoins and it runs what kind of strategies does it run? So Um maybe I'll just repeat the question.

Um So the you got the My understanding is you have the ST Vaults which are like the money LEGO blocks that you've described. And then you have the Lido Earn which seems like a simplified interface for the ST Vaults, right? Okay. Anyway, I'll just continue the question. And then so in the ETH one you just allocate ETH or staked ETH and that runs like, you know, complex strategies like I assume like leveraged leveraged ETH or whatever and like lending. And then in the USD one I'm curious like you're depositing USD but are you borrowing like Is it like a fixed income product or or not? And if it isn't like could you run like fixed income product strategies with the stake Vaults? Yeah, that's a really good question. So right now it doesn't have like a fixed income component, but

actually we're like the way that these Vaults are structured right now is it's like a meta Vault model. So the main Vault itself is like a mother Vault and we can attach different strategies underneath as a sub Vault. We will add a more exotic strategy for for stables that will include kind of like a fixed income thing and then ramp it up as we see, you know, how well it's doing from a performance and from a risk perspective. Mostly stables right now is kind of like farming yield incentives if you want to think about it this way, right? So a lot of layer 2s are deploying and offering stable Vaults where you can farm their secondary tokens.

So doing things like that or with a small amount of exposure potentially like lending stables on some lending markets, borrowing other other assets that can then be sorry, that can then be used to kind of like like lever also stables. Okay, sweet. Um and then I just had another one as well I wanted to ask you. Um So, am I right to think with the Lido earn with the um it being kind of like protected by the treasury it's kind of like a senior junior tranche, right? Where you have the junior tranche uh funded by the the treasury and then the allocators are actually like on the senior tranche, right? Yeah, it's a very similar model but I I don't want to go like fully ahead and call it like that

because it's not fully automated. So, if something like that were to be fully automated I would be comfortable to call it like actual trancing. Um the way that it works right now is that like the DAO holds a position and there's like a a committee if you want to think about it this way that basically has a mandate that if something happens like the DAO will burn its shares to make uh users whole if you want to think about it this way. But yeah, it it it's a very very uh similar idea in practice. Cool. Thank you. Mhm. Okay thanks. >> [applause]