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Health Emergency Guide

TLDR​

The stVault has two key parameters: Reserve Ratio (RR) and Force Rebalance Threshold (FRT).

  • RR (e.g., 10%) limits how much stETH can be minted from ETH in the stVault.
  • FRT (e.g., 9%) triggers a forced rebalance if the stVault’s reserve drops too low.

When slashing events (or low performance) reduce the stVault's total value, its reserve factor can fall below RR and FRT, making it unhealthy and requiring corrective action.

There are three ways to restore stVault Health:

  1. Burn stETH – Restores the reserve ratio without changing total value; keeps rewards unchanged but reduces external earnings.
  2. Add ETH – Increases stVault value and future rewards; requires adding extra capital.
  3. Rebalance / Wait for Forced Rebalancing – Moves ETH to Lido Core and writes off equivalent debt; least recommended, as it lowers stVault total value and reduces future rewards.

Definitions​

  • Reserve Ratio (RR) limits minting — this means that users will be able to mint up to 90% of stETH out of ETH they put into the stVault. However, falling below RR doesn't force an immediate correction.

  • Force Rebalance Threshold (FRT) defines when forced rebalancing is allowed to happen. A rebalancing may happen to improve the stVault's health and prevent stVault insolvency. It is always lower than RR: FRT < RR (e.g., 9% if RR = 10%).

  • Health Factor (HF) is a metric calculated using the following formula: Health Factor = Total Value × (1 − FRT) / Minted stETH

    We have following levels of HF in stVaults Web UI:

    • HF ≥ 125% - Healthy stVault
    • 125% > HF ≥ 105% - Healthy stVault, and moderate risk of rebalancing
    • 105% > HF ≥ 100% - Healthy stVault, but too close to Unhealthy stVault, critical risk of rebalancing
    • 100% > HF - Unhealthy stVault

  • Utilization Ratio (UR) is a metric that shows how much stETH is minted out of Total stETH Minting Capacity: Utilization Ratio = (stETH Liability / Total stETH Minting Capacity) × 100%

Explanatory scenario:​

stVault​

  • RR = 10%
  • FRT = 9%
  • Vault Owner deposits 100 ETH → mints 90 stETH (up to max mintable)
  • Utilization ratio = 90 / 90 = 100%
  • Health Factor = 100 × (100% − 9%) / 90 = 101.11%

Step 1: Slashing​

Validator gets slashed by 1 ETH → total backing = 99 ETH:

  • Total Value = 99 ETH
  • Reserve: 99 − 90 = 9 ETH
  • Reserve factor is 9 / 99 = 9.09% → below 10% RR but above 9% FRT
  • Utilization ratio = 90 / (99 × 0.9) = 101%
  • Health Factor = 99 × (100% − 9%) / 90 = 100.1%

The stVault is still healthy, but is really close to rebalancing (Reserve factor is below RR). However, nothing happens yet: the user can't mint more stETH, but forced rebalancing will not happen if the ratio stops decreasing.

Step 2: More slashing​

Validator slashing continues by an additional 0.5 ETH → total backing = 98.5 ETH:

  • Total Value = 98.5 ETH
  • Reserve: 98.5 − 90 = 8.5 ETH
  • Reserve factor is 8.5 / 98.5 = 8.63% → below 10% RR and below 9% FRT
  • Utilization ratio = 90 / (98.5 × 0.9) = 101.5%
  • Health Factor = 98.5 × (100% − 9%) / 90 = 99.6%

Step 3: Healing stVault​

The stVault is unhealthy now and action is required to restore its health.

There are a few ways to restore health:

1. Burn stETH​

User needs to burn 1.35 stETH, so that the stVault has:

  • Total Value: 98.5 ETH
  • Debt: 90 − 1.35 = 88.65 stETH minted
  • Reserve = 98.5 − 88.65 = 9.85
  • Reserve factor 9.85 / 98.5 = 10% → equals 10% RR and above 9% FRT
  • Utilization ratio = 88.65 / (98.5 × 0.9) = 100%
  • Health Factor = 98.5 × (100% − 9%) / 88.65 = 101.11%

Pros:

  • Should this method be selected to restore stVault health, the user's future rewards from the stVault will remain unaffected, since the Total Value remains unchanged.

Cons:

  • The user is required to burn stETH, potentially resulting in a decrease in earnings outside the stVault.

2. Add ETH to the stVault​

User needs to top up the stVault balance (Total Value) by 1.5 ETH:

  • Total Value: 98.5 + 1.5 = 100 ETH
  • Debt: 90 stETH minted
  • Reserve = 100 − 90 = 10
  • Reserve factor 10 / 100 = 10% → equals 10% RR and above 9% FRT
  • Utilization ratio = 90 / (100 × 0.9) = 100%
  • Health Factor = 100 × (100% − 9%) / 90 = 101.11%

Pros:

  • If this method is selected to restore stVault health, the user's future rewards from the stVault will increase, as the Total Value is higher.
  • The user is not required to burn stETH, so their potential earnings outside the stVault remain unaffected.

Cons:

  • The user needs to provide additional capital to the stVault.

3. Rebalance or do nothing and wait for forced rebalancing​

⚖️ Rebalance is moving enough ETH from the stVault to Lido Core, writing off the same stETH debt 1:1 (not burned, now backed by Core).

For this example, the required amount to be moved is 13.5 ETH:

  • Total Value: 98.5 − 13.5 = 85 ETH
  • Debt: 90 − 13.5 = 76.5 stETH minted
  • Reserve = 85 − 76.5 = 8.5
  • Reserve factor 8.5 / 85 = 10% → equals 10% RR and above 9% FRT
  • Utilization ratio = 76.5 / (85 × 0.9) = 100%
  • Health Factor = 85 × (100% − 9%) / 76.5 = 101.11%

This is the least recommended method for restoring stVault health.

Pros:

  • The user is not required to burn stETH, so their potential earnings outside the stVault remain unaffected.

Cons:

  • The user's future rewards from the stVault will be significantly reduced due to a decrease in the stVault's Total Value — from 98.5 ETH to 85 ETH (approximately −14%).

Let’s sum up:​

In this scenario, there are three possible ways to restore the stVault’s health:

  1. Repay 1.35 stETH
  2. Supply 1.5 ETH
  3. Rebalance 13.50 ETH

All three methods ultimately bring the stVault’s Utilization Ratio back to 100%. However there are pros and cons for each of the methods.