Lido's Deposit Reserve Affects stETH Withdrawals

Lido's protocol has a reserve target of 1,500 ETH for new validator deposits, which can affect stETH withdrawals in times of high demand. This is because the protocol uses its buffer to finalize withdrawal requests, and setting aside a portion for deposits reduces the available funds for withdrawals.

The Lido Curated Module Committee gained authority on September 25 to adjust this priority. As of September 27, the deposit reserve remained at 1,500 ETH, with no motion filed to change it yet. The committee's plan is to temporarily remove the protected slice and then consider restoring it for a new staking module.

The buffer consists of three portions: a deposits reserve, a reserve for unfinalized stETH requests, and unreserved ETH that can fund validator deposits. The 1,500 ETH target governs the protected portion, which is restored towards this target with an accounting oracle report. Reducing the reserve below its current level takes effect immediately, while increasing it waits for the next report.

When both withdrawal requests and executable validator deposits compete for a limited pool of ETH, the setting matters most. Setting the target to zero would let the withdrawal reserve claim ETH that had been protected for deposits. However, actual finalization still depends on available ETH and the queue, while validator deposits can continue from any unreserved buffer.