A proposed Lido feature would address liquidity gaps in its planned lending markets by allowing withdrawals to draw on borrower collateral, with riskier positions tapped first.
Lido outlined Fallback Exits in an Oct. 16 governance forum post. If an isolated market could not supply the asset a lender wanted to withdraw, the lender could receive collateral from borrowers to cover some or all of the shortfall. Lido would rank borrowers by their distance from the liquidation loan-to-value (LLTV) threshold, starting with positions nearest that point. If collateral is used, the affected borrowers’ outstanding debt would also be reduced; the post does not specify a formula.
The arrangement would give lenders another withdrawal route while placing the first exposure on borrowers nearest liquidation. Lido said lenders in traditional markets may otherwise wait days or weeks for liquidity to return.
Lido Lend is planned as a lending service built on a modified version of Morpho Blue. Its isolated markets would pair related assets, including wrapped Ether (wETH) and wrapped staked Ether (wstETH).
Lido expects to publish technical specifications and market settings within two weeks of its Oct. 16 post. The project’s roadmap puts a mainnet launch after DAO governance steps are complete, and Lido also plans to publish audit reports. The proposed mechanism’s specifications remain subject to governance approval.
