NEST - Network Economic Support Tokenomics

Summary

NEST is a modular mechanism that, when supplied with stETH, enables those stETH to be swapped for LDO via STONKS and routes the LDO back to the Lido DAO Treasury, effectively taking it out of circulation. The net effect it has is essentially to change the respective share over governance rights that holders enjoy, including over future ‘value distribution’ proposals.

This proposal requests approval of the concept of the NEST mechanism and further research and design, while final designs and actual use of NEST will be decided in a future proposal once it is ready.

Introducing NEST

NEST proposes a modular and future-proof system that allows triggering repurchases of LDO and can provide programmatic enforcement guarantees to token holders for the future. As written, it would require Aragon DAO votes for specific quantums of stETH to be deposited in NEST to activate. The idea is that a future, automated, module could ‘feed’ the NEST with stETH under any other parameters, including automated ones.

Any stETH available in NEST is subject to have 1 STONKS Cowswap order created for it at a minimum every 7,000 blocks, or approximately once a day. The maximum order size possible is configurable through an Aragon DAO vote and should aim to avoid slippage greater than 1% in a single transaction. Successfully triggering a new STONKS order rewards the address that executes the transaction with 2bps of the order size prior to execution, in stETH. These parameters can and probably will be modified depending on market conditions nearer to deployment.

Key Takeaways

• Implements an explicit mechanism to establish the credibility of surplus allocation. Programmatic and optimistic execution is a stronger guarantee than leaving it up to ad-hoc token holder votes (a mechanism that exists and could be enacted today with sufficient votes).
• Retains primacy of LDO. Delegates and regular LDO voters could, at any time, change the parameters to stop NEST allocations or remove it from the protocol altogether.
• Stacks and synergizes with any other tokenomics changes, value allocation proposals, or one-time allocations of surplus. NEST takes any value allocation mechanisms in place (whether implicit as today or explicit new ones in the future) and changes the share of the claim that each token represents on it.

Future modules

• The proposal suggests a modular architecture that could accommodate future modules and extensions to deposit stETH into NEST. Any stETH deposited on NEST would eventually end up as LDO in the DAO Treasury.
• One such module could, for instance, be an automation that pulls out any surplus over a token holder defined threshold. It could also, for instance, use oracles to set execution limits based on market prices of LDO/ETH, i.e. to only allocate surplus if the LDO/ETH price is lower than historical bounds.
• Further opportunistic, one-time allocations could be enabled through additional Aragon votes.
• A similar NEST could also be deployed for the reverse flow to issue and mint LDO for stETH if there are future market conditions where the LDO/ETH multiple may appear inflated.

Funding

The initiative does not require any additional budget in 2025 beyond the allocation already approved in the [EGG] Lido Labs BORG Foundation Grant Funding Request (Apr-Dec 2025). Subsequent funding will be included in future Lido Labs grant requests.

Proposal actions

This proposal requests approval of the concept and further research and design. Ratification of this proposal does not imply approval of any parameters or initiation of distributions. A follow-up proposal with final designs and implementation details will be deferred to the outcome of the technical evaluation, and will be requested within the next six months. They will have to be subject to DAO approval, and the final release will be subject to an Aragon on-chain vote when the time comes.