NEST: Automated LDO Buyback and Liquidity Provisioning

TL;DR

This proposal seeks DAO approval for the final design and implementation of NEST — a rule-based mechanism that creates an on-chain link between Lido protocol performance and LDO. If staking revenue exceeds an operating baseline, NEST can convert a bounded share of that surplus into LDO via CoW Swap. In the currently proposed Liquidity Provisioning (LP) mode, purchased LDO is paired with wstETH and deployed as DAO-owned liquidity in a Curve LDO/wstETH pool (LP tokens remain DAO-owned). NEST is automatic, permissionless, capped, and protected by emergency pause controls. The full NEST design is specified in LIP-36.

Mechanism Design

NEST is a deterministic on-chain system that can permissionlessly convert a bounded share of protocol revenue into LDO via CoW Swap using Stonks v2. Execution is permissionless: the NESTController contract funds orders from its stETH balance, with parameters computed on-chain based on current surplus and limits. In LP mode (proposed initial configuration), the surplus share is split equally between LDO purchases and corresponding wstETH pairing and deployed as LDO/wstETH DAO-owned liquidity in a Curve v2 NG pool. In Treasury mode, the full surplus share would instead be converted into LDO and transferred directly to the DAO Treasury. Switching modes requires a DAO on-chain vote; NEST delivered with both modes available.

Funding. NEST must be explicitly funded in order to be operational. stETH for execution is held on NESTController, the system's central coordinator. The Treasury Management Committee (TMC) will be responsible for keeping the NESTController sufficiently funded for ongoing NEST operations. It is proposed that the NESTController will be funded using the existing TMC stETH Easy Track payment factory.

Surplus mechanics. NEST uses a cumulative model to determine available surplus. Each day, staking revenue is compared to the proposed $40M/year operating baseline (~$109.6k/day). If the revenue for that day is above the baseline, cumulative buyback capacity increases; if below, the deficit reduces that capacity. The day's order size is set by that day's surplus allocation (up to the $50k daily cap), not by the cumulative balance itself.

Zero-seed pool. No upfront LDO injection from the Treasury is required or beneficial. However, deploying the pool requires up to 2 wstETH and the equivalent amount in LDO for initialization. These operational expenses will be covered from the approved EGG budget.

Revenue sources. At launch, NEST tracks staking revenue only, but the architecture is designed to accommodate additional revenue sources, which may be added in the future via an on-chain DAO vote.

Emergency controls. The system supports granular, component-level pauses: execution (NESTController), liquidity provisioning, revenue inputs, order creation/settlement (Stonks v2), and price feeds (OracleRouter) can each be halted independently without shutting down the entire system. Asset recovery is not subject to pause restrictions and may be performed at any time, either via an on-chain vote or by the TMC.

Trade execution is proposed to occur daily via a keeper bot, provided cumulative buyback capacity remains non-negative, funding is sufficient, and permissionless execution succeeds.

More details can be found in LIP-36. Audit reports will be published on the Research forum prior to the on-chain vote to launch NEST.

Parameters

Parameter	Proposed Value	Notes
Revenue baseline	$40M/year (~$109.6k/day)	Surplus computation floor
Surplus share	50% (5000 bps)	Share of daily surplus allocated to NEST
Daily cap	$50,000	Primary active safety limiter
Annual cap	$10,000,000	Rolling 365-day ceiling
ETH price floor	$0 (disabled)	Minimum ETH price below which buybacks are disabled. Under the current revenue structure, NEST buybacks naturally stop at approximately $2,700 ETH.
Pool slippage tolerance	2% (200 bps)	MEV guard on Curve deposits

All parameters are configurable via a full DAO on-chain vote.

Roles

Aragon Voting, 0x2e59A20f205bB85a89C53f1936454680651E618e — admin, can change any parameter, manage roles, switch modes, and perform recovery/maintenance actions (transfer LP tokens, reset buyback accounting, e.g., when accumulated deficit becomes indefinitely blocking, recover assets back to Treasury) via a full DAO vote.

Treasury Management Committee (TMC), 0xa02FC823cCE0D016bD7e17ac684c9abAb2d6D647 — operational manager, can fund the NESTcontroller via TMC stETH Easy Track payment factory, remove LP positions, return assets to Treasury, and use emergency controls.

Emergency Brakes, 0x73b047fe6337183A454c5217241D780a932777bD — emergency-only, can trigger emergency controls and cancel Stonks swap orders and revoke COW relayer allowance.

Permissionless operations — executing buybacks, adding liquidity to the pool, retrying failed CoW Swap orders, and converting unpaired wstETH back to stETH and returning it to the NESTController (if any excess remains after LDO purchases).

Any role configuration change requires a full DAO on-chain vote.

Next steps

If this proposal is approved:

• External audits of the NEST will be finalized, and audit reports will be published on the Research forum prior to the NEST on-chain release.
• NEST launch will be proposed in one of the subsequent DAO on-chain votes.
• Following deployment, the Treasury Management Committee (TMC) will begin funding the NESTController via Easy Track, enabling the NEST to become operational.