Lido Explains NEST Mechanism: Initially Adopting Treasury Model, Connecting Protocol Growth with LDO Value

Odaily News: Ethereum staking protocol Lido DAO has published an article explaining the NEST (Network Economic Support Tokenomics) mechanism, which uses on-chain automation to link protocol revenue with LDO token value, enabling continuous LDO buybacks.

NEST is a core component of Lido's "LDO Value Alignment" strategy, designed to allow LDO holders to more directly share in protocol growth revenue. The mechanism is backed by surplus funds from the DAO treasury. When Lido's staking business revenue exceeds a set benchmark, a portion of the excess revenue will be automatically swapped for LDO via CoW Swap.

According to the initial parameters set by Lido DAO, the NEST revenue benchmark is set at an annualized $40 million (approximately $109,000 per day), with 50% of the excess amount used to buy back LDO. The daily buyback cap is $50,000, with a cumulative cap of $10 million over 365 days. Buybacks are executed daily through a permissionless on-chain process.

In its initial phase, NEST will operate in "Treasury-only mode," with purchased LDO going directly into the DAO treasury. In the future, when market conditions are suitable, the DAO can switch to LP mode through an on-chain vote, allocating half of the funds to purchase LDO and converting the other half into wstETH to provide Curve liquidity.

Lido stated that compared to alternatives such as manual periodic buybacks, direct token burns, or simple revenue-proportional distributions, NEST achieves a transparent, adjustable, and human-intervention-free buyback mechanism through smart contracts and on-chain governance.

The mechanism includes multiple risk control measures, including daily fund caps, on-chain governance parameter adjustments, price oracle protections, and emergency pause mechanisms, to mitigate risks from market manipulation, oracle attacks, and protocol revenue volatility.

Backtesting based on revenue data from 2024 to 2025 shows that the NEST model is expected to execute approximately $7.09 million in LDO buybacks, consistent with the target spending scale. Lido stated that the DAO can adjust relevant parameters through on-chain voting in the future based on changes in protocol economics.

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