Lido said Lido Earn depositors now have two layers of loss protection, with eligible losses first absorbed by Firelight and remaining losses potentially covered by Lido DAO. According to Foresight News, the protection applies automatically at the vault level and requires no action from depositors.
Firelight, an on-chain protection protocol, absorbs eligible losses up to set limits in each 30-day period. In the initial period, coverage is capped at 5.7% of EarnETH TVL and 8% of EarnUSD TVL, covering incidents including smart contract vulnerabilities, oracle failures, and governance attacks.
For losses beyond Firelight’s limits, Lido DAO may absorb the remainder by burning shares held in the initial deposits, up to $3 million for EarnETH and $2 million for EarnUSD.