Twyne x Lido Alliance Proposal
TL;DR - In this proposal, Twyne asks for the onboarding of Twyne as a part of the Lido Alliance. The proposal is supported by the Lido Alliance BORG team.
Twyne is a credit delegation protocol built on top of existing lending markets. It enables lenders to delegate their unused borrowing capacity in exchange for yield, creating additional credit lines and unlocking new strategies on top of lending protocols like Euler.
How Twyne Expands stETH’s Ecosystem with a Diverse Product Line:
Twyne expands the use cases for stETH in DeFi:
- stETH holders can underwrite various cases and also get liquidation incentives passively by absorbing liquidated positions using their idle borrowing capacity.
- Enables higher-leverage staking strategies by providing access to additional credit lines via delegated borrowing power.
What Twyne expects from Lido:
Twyne seeks Lido’s strategic endorsement, technical guidance during integration, and promotional support to accelerate adoption. The team expects active collaboration with Lido contributors to align credit delegation features with stETH-specific needs and use cases.
How much alignment collateral will be locked in the Alliance:
- 10% of Twyne’s token supply subject to a 1 year cliff and 2 years vesting
- 50% revenue share on stETH pools where revenue share for Lido Alliance is primarily used for incentives and liquidity on Twyne
Background
Traditional lending markets rely on a one-size-fits-all risk model. While newer protocols introduced isolated pools for flexibility, any shared liquidity exposes the entire vault to collective insolvency risk. Twyne takes a different approach: only a subset of users opts into additional risk, while passive lenders in the base protocol remain fully isolated. All users continue to access the same underlying liquidity, preserving capital efficiency and strengthening network effects.
Rather than building a new lending market, Twyne introduces new functionality modularly on top, allowing us to extend the feature set of underlying pools. As underlying pools grow, so does the opportunity for credit delegation and any other secondary lending logic.
A significant portion of collateral in lending protocols remains underutilized, as users often prefer passive yield over borrowing. Twyne unlocks this idle borrowing power, turning unused capacity into productive, yield-generating credit.
Protocol V1 Overview
Twyne enables users to delegate their unused borrowing power to others, effectively underwriting their loans. Borrowers tap into this delegated credit, borrowing on behalf of the delegators, and pay a fee in return.
While borrowers still post collateral, they’re no longer constrained by the fixed parameters of the underlying lending market. Instead, their access to credit depends on whether a delegator is willing to lend on other terms. This introduces flexible, opt-in risk segmentation and unlocks high on-chain leverage.
The system handles liquidation to ensure that the delegated collateral remains protected, with liquidators able to manage risk through debt clearance or collateral top-ups. Twyne’s top-up liquidation mechanism is tailored to minimize risks and protect credit providers while having the underlying lending markets liquidation mechanism as a fallback mechanism. stETH lenders with idle borrowing power can subsume liquidated positions and get liquidation incentives passively.
Use cases further down the road:
- Route Lending through stETH → Earn more yield and enable credit routing
- Aggregate Lending across many lending markets → Arbitrage across markets
- First loss capital strategies → Restructure risk
Overview:
Integration and Benefits
The strategic integration of Twyne within the Lido ecosystem capitalizes on stETH’s potential to drive new utility, enhance yields, and boost market efficiency. By enabling stETH holders to delegate unused borrowing power, Twyne creates new yield generation avenues beyond traditional staking rewards. The high collateral factors of stETH on established lending markets make it ideal for credit delegation.
- Delegated credit unlocks new yield opportunities for passive holders.
- stETH benefits from a supercharged E-Mode, with access to higher max LTVs.
- Modular vaults enable customizable risk exposure tailored to Lido’s ecosystem needs.
Security and Operations
Twyne follows a security-first approach grounded in open-source development, modular architecture, rigorous testing, and real-time monitoring. Twyne’s smart contracts are built on the EulerV2 stack, benefiting from approximately $10M invested in security. Over 29 audits were conducted by top security firms. The platform uses unmodified EulerV2 code for credit vaults, inheriting established security guarantees, while custom vault code comprises only 700 SLOCs. This clean layering ensures we inherit the security guarantees of Euler’s audited and proven foundation. Technical and business support from the Euler team strengthens Twyne’s operational foundation.
Our audit with yAudit (now Electisec) is scheduled for April, with invariant testing suites currently being developed by Enigma. Twyne is built on Euler’s battle-tested EVC/EVK architecture and is actively incubated by the Euler team, who also review our codebase. Euler was previously audited by Enigma and yAudit, with yAudit uniquely identifying a critical vulnerability that was addressed following the audit. [Read the full report here]
We will share both audit reports publicly once they are available.
The team brings three years of DeFi consulting experience, with expertise spanning over lending market risk modeling and mechanics, CDP stablecoin designs, and AMM modeling. The core developers contributed extensively to cybersecurity and smart contract auditing at yAudit.
Expectations from Lido Alliance
Twyne seeks strategic endorsement from the Lido Alliance to signal ecosystem alignment and anticipates active collaboration with Lido core contributors to maximize stETH utility within lending markets. Integration assistance, promotional support, and technical resources for testing would accelerate development and enhance operational efficiency.
Twyne aims to establish a sustainable partnership focused on continual product evolution aligned with Lido community needs.
Conclusion
The Twyne-Lido Alliance partnership represents an advancement in maximizing stETH utility and efficiency. This partnership will provide tangible benefits to stETH holders, the Lido community, and the broader DeFi ecosystem while maintaining the highest security standards. By enabling leverage beyond traditional leveraged staking rewards, Twyne helps fulfill Lido’s vision of a more liquid and efficient staking economy.
The collaboration between Twyne and Lido Alliance will drive mutual growth and innovation across DeFi through shared expertise and collaborative feature development. We invite the Lido DAO to endorse this proposal and join us in realizing the next wave of DeFi innovation. Our team stands ready to work closely with Lido core contributors to maximize this integration’s potential.
Next steps
After the proposal is discussed on the forum, a Snapshot vote will follow to gather community feedback. If the proposal receives community support, Twyne will be onboarded into the Lido Alliance, and the integration of Twyne within the Lido ecosystem - along with any necessary follow-up actions.
Supporting Documents:
) deposit pool on Aave/lending market