# Lido proposes Kelp-specific EarnETH first-loss exception

> If approved, EarnETH could apply its first-loss backstop below the normally applicable threshold for this incident, but only after accounting for alternative coverage.

- URL: https://riadefi.com/on-chain/2026-04-30-lido-earneth-kelp-first-loss-exception/
- Type: Economic change
- Stage: Proposed
- Evidence: confirmed
- Materiality: material
- Event date: 2026-04-30
- Version: 1, published 2026-08-22 (first published 2026-08-22)
- Follow-up: 2026-05-07
- Advisor-relevant: no
- Affects: Lido (protocol)

## What happened

Lido Earn contributors proposed authorizing a one-off use of the existing first-loss mechanism for actual residual Kelp-related losses borne by EarnETH users, even when losses fall below the existing 1% threshold.

## What changed

If approved, EarnETH could apply its first-loss backstop below the normally applicable threshold for this incident, but only after accounting for alternative coverage.

## What did not change

The proposal does not alter the general threshold, add a treasury allocation, subsidize yield, replace foregone APY, or establish that any payment has occurred.

## Confirmed

- The requested authorization is limited to residual Kelp-related losses borne by EarnETH users.
- The proposal describes the exception as one-off and leaves the general threshold unchanged.
- The backstop would apply only to the extent alternative loss coverage is insufficient.
- The proposal commits contributors to publishing a postmortem if approved.

## Still open

- The Snapshot outcome and any additional implementation authorization.
- The actual residual loss after external recovery and curator coverage.
- The contributors' attributed estimate of approximately 400–600 ETH.
- The timing of normal operations and withdrawals for affected EarnETH users.
- Whether and how much of the first-loss backstop is ultimately used.

## What it means for an advisor

- Review the Lido memo's EarnETH loss-allocation and withdrawal assumptions before treating the proposed exception as effective coverage.
- Monitor the vote, final loss calculation, alternative coverage, postmortem, and any executed payment.
- Do not infer that the proposed backstop makes EarnETH or the underlying Kelp exposure safe or fully recovered.

## Sources

1. [Authorize Lido EarnETH Loss Coverage Below 1% Threshold For The Kelp Incident](https://snapshot.org/#/lido-snapshot.eth/proposal/0x5629f9b201f32dbd5780f7e2e5601eed7504cdb7919b622a7ef039261d3c671a) · Snapshot (Lido DAO space) · 2026-04-30


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Published by Ketju Research on RIADeFi (https://riadefi.com). Educational research for financial professionals; not investment, legal, tax, or compliance advice.