James Watt
The Lido protocol has announced a comprehensive upgrade to its foundational staking infrastructure, Lido Core, marking a significant evolution in its operational framework. This substantial update introduces a suite of major improvements across its staking modules, designed to strengthen protocol health and long-term sustainability, enhance alignment with Ethereum’s ongoing roadmap, and advance decentralization for the benefit of both Lido and the broader cryptocurrency ecosystem. The upgrade, which requires no action from individual stakers, is handled entirely at the protocol level, ensuring a seamless transition for participants.
At the heart of the Lido protocol lies Lido Core, the primary liquid staking infrastructure responsible for algorithmically allocating user-deposited ETH to validators. These validators are run by a diverse network of Node Operators, encompassing both permissioned and permissionless entities across various Staking Modules. The term "Lido Core" was established to differentiate the protocol’s original, foundational architecture—a single pooled model—from the more recent modular staking primitives, known as stVaults, which were launched as part of Lido V3 in December 2025. This distinction underscores Lido’s commitment to innovation while maintaining the robustness of its core offerings.
The strategic upgrade arrives as Ethereum continues its post-Merge evolution, with increasing demands for scalability, efficiency, and decentralization. Liquid staking protocols like Lido play a crucial role in enabling broader participation in Ethereum’s Proof-of-Stake consensus mechanism, allowing users to stake ETH while retaining liquidity through liquid staking tokens like stETH. Lido, as a leading player in this space, is continuously adapting its infrastructure to meet the evolving needs of the network and its stakers.
"This Lido Core upgrade is a testament to our continuous commitment to Ethereum’s health and decentralization," stated Isidoros Passadis, Chief of Staking at Lido Labs Foundation. "By aligning our largest staking modules with Ethereum’s roadmap and introducing advanced mechanisms, we are not only enhancing the resilience and efficiency of the Lido protocol but also contributing to the overall stability and decentralization of the Ethereum network."
Curated Module v2: Reinforcing the Protocol’s Foundation
The Curated Module has served as the bedrock of Lido’s validator set since the protocol’s inception in 2020. As of July 2026, it secures approximately 90% of all ETH staked within Lido Core, making it the largest and most critical component of Lido’s staking operations. Recognizing the dynamic nature of Ethereum staking, Lido contributors have continually sought to advance these modules, ensuring Lido Core remains synchronized with Ethereum’s roadmap while safeguarding the protocol’s long-term sustainability.
Curated Module v2 (CMv2) represents the next significant leap in this evolutionary process. It introduces a sophisticated market-driven operator economics framework, designed to incentivize optimal performance and foster greater accountability among Node Operators. Furthermore, CMv2 streamlines operational procedures, integrates new security mechanisms, and defines dedicated Node Operator types, all aimed at empowering operators to further strengthen Ethereum’s decentralization. The introduction of CMv2 will be phased to ensure smooth adoption and minimize disruption.
0x02 Native Support and Validator Consolidation
A cornerstone feature of CMv2 is the native support for 0x02 Withdrawal Credentials (WC). The Pectra upgrade, a significant milestone in Ethereum’s development, enabled validators to increase their maximum effective balance from 32 ETH to 2,048 ETH through the introduction of 0x02 WC and validator consolidations. While Lido initially rolled out 0x02 support with the launch of stVaults in December 2025, CMv2 now extends this crucial capability to Lido Core’s largest staking module.
This enhancement facilitates the migration of over 265,000 existing Curated Module validators from the legacy 0x01 WC to the more efficient 0x02 standard. This mass migration, achieved through validator consolidations, is projected to nearly double the share of ETH secured by compounding validators within Lido, increasing it from 32.06% to an impressive 52.21%.
The implications for the broader Ethereum network are substantial. By consolidating numerous smaller validators into fewer, larger ones, the total number of active validators across the Ethereum network is expected to decrease significantly. From approximately 880,000 at the time of writing, this number is anticipated to fall to around 628,000 post-consolidations, not accounting for new validators joining the network or other independent consolidations. This reduction is poised to meaningfully alleviate network congestion and decrease Consensus Layer overhead, aligning the Lido protocol even more closely with Ethereum’s overarching scalability goals. Upon completion, this migration is expected to reduce the number of attestation messages across the network by approximately 29% each epoch, leading to a leaner and more efficient consensus process.
Differentiated Node Operator Types and Incentives
Moving beyond a uniform approach, CMv2 introduces a sophisticated operator classification system that acknowledges and reflects the diverse contributions of Curated Node Operators. The new Node Operator Type Framework enables the protocol to recognize varying levels of contribution to protocol growth, infrastructure resilience, support for Ethereum public goods, and overall decentralization. This framework categorizes operators into distinct types, each with tailored incentives and responsibilities.
These operator types include, but are not limited to, those focused on core infrastructure, client diversity, geographical distribution, and research and development. The incentive structure within Curated Module v2 has been meticulously designed to reflect these contributions, ensuring that operators are appropriately rewarded for their efforts in helping both the Lido protocol and the Ethereum ecosystem flourish symbiably.
This framework formalizes a long-standing approach by the Lido DAO, which has consistently supported Ethereum client teams and public-good builders through participation in the Curated Module and dedicated LEGO grants. As of July 1, 2026, seven critical client teams have been onboarded as Curated Node Operators, collectively receiving 8,710 stETH (approximately $21 million) in cumulative rewards for operating validators on behalf of Lido stakers. This strategic support is vital for fostering a robust and diverse client ecosystem, which is a cornerstone of Ethereum’s security and resilience.
Beyond client development, Lido contributors and Node Operators have maintained a sustained focus on enhancing client, geographic, and infrastructure diversity since the Merge. Coordinated efforts have steadily reduced the protocol’s reliance on any single client, geographical region, or cloud provider. This proactive approach significantly bolsters Ethereum’s overall health and network resilience by mitigating single points of failure. Detailed metrics on this progress are publicly available through the Validator and Node Operator Metrics (VaNOM) dashboard, providing transparency on the diversification efforts over the past five years.
Enhanced Security: Bonding and Penalty Mechanisms
The legacy Curated Module, while effective, largely operated on a trust-based model, relying on the established reputation of its operators as the primary guarantee of alignment and reliability. Curated Node Operators were expected to maintain high performance standards and compensate stakers and the protocol in the event of losses.
As the staking ecosystem matures and scales, CMv2 advances this model by integrating robust ETH-backed bonding and a comprehensive Penalty Framework. These mechanisms are designed to provide financial coverage in scenarios of operator underperformance, operational downtime, slashing events, or violations related to Execution Layer (EL) rewards. Rather than replacing the existing reputation-based system, CMv2 complements it with these new bond-based security and accountability layers. This dual approach ensures a stronger alignment of operator behavior with staker interests, thereby significantly strengthening the overall robustness and reliability of Lido Core.
Streamlined Governance and Node Operator Management
One of the operational challenges of the previous Curated Module design was the requirement for on-chain DAO votes for even routine administrative changes, such as updating an operator’s address. This process often led to increased operational overhead and potential delays in responding to time-sensitive matters.
Curated Module v2 addresses this by streamlining governance. Routine operational updates and administrative tasks are now permissioned to Node Operators and the newly established Curated Module Committee (CMC), respectively. This delegation significantly reduces the operational burden on the DAO and decreases reliance on cumbersome off-chain coordination. Crucially, the DAO retains overarching authority over the composition of the Node Operator set and parameters related to Node Operators, maintaining the ability to override or veto changes when necessary. This balanced approach enhances operational efficiency while preserving the fundamental security and oversight mechanisms inherent in decentralized governance.
"The upgrade to Lido Core signifies a leap forward in operational efficiency and decentralization," noted Aleksandra Gusakova, Lido Core Product Lead at Lido Labs Foundation. "By empowering Node Operators with streamlined management tools and reinforcing accountability, we are building a more resilient and adaptable liquid staking infrastructure for Ethereum."
Lido CSM v3: Empowering Permissionless Staking
After 1.5 years of rigorous real-world battle-testing, the Community Staking Module (CSM) has proven itself as a highly scalable and reliable permissionless staking avenue within the Lido ecosystem. Today, it stands as the largest alternative to vanilla solo staking, securing over 770,000 staked ETH across an estimated 335 active operators. This represents roughly 8.5% of Lido’s Total Value Locked (TVL) and 1.9% of the total Ethereum network stake, underscoring its significant contribution to decentralization.
The evolution of Lido’s permissionless staking continues with the Lido Core upgrade, as CSM itself evolves into CSM v3. This iteration is designed to be even more resilient and operator-friendly, featuring several under-the-hood technical optimizations. While specific new features were not exhaustively detailed in the initial announcement, the general thrust is towards enhanced scalability, improved operator experience, and potentially new reward distribution models that further incentivize community participation. The introduction of Identified DVT Clusters (IDVTC) within CSM v3 provides a structured pathway for operators to leverage Distributed Validator Technology, enhancing fault tolerance and security. Further information on IDVTC and other participation options is available on lido.fi/csm.
Simple DVT Module: Transitioning for Future Growth
In a strategic move following a recent Snapshot vote, the 72 regular clusters within the Simple DVT Module (SDVTM) have been wound down. The Simple DVT Module played a pivotal role in advancing Distributed Validator Technology (DVT) adoption, not only within Lido but also across the broader Ethereum ecosystem. Its operation allowed for a significant expansion of the number of participating Node Operators in Lido Core by more than 300, substantially enhancing the diversity and decentralization of Lido’s validator set during its experimental phase.
The winding down of these regular clusters is part of a natural progression, enabling resources to be refocused on more mature and scalable DVT implementations, such as the IDVTC within CSM v3. Operators from the affected clusters are not left without options; they have clear pathways to continue validating through the Community Staking Module (CSM) via several integration methods. Additionally, the Lido DAO has approved a grant framework to formally recognize the invaluable contributions of operators who participated within the Simple DVT regular clusters, acknowledging their pioneering efforts in advancing DVT. Details of this grant are accessible in the dedicated Research Forum post.
It is important to note that Super Clusters, which comprise Advanced Node Operators and members of the Curated Module running larger validator sets, are unaffected by this change. These clusters continue operating as planned until their originally approved wind-down date. Their longer-term future, including potential migration to another staking module or an earlier wind-down, will be subject to separate evaluation based on prevailing market conditions and future governance decisions.
Looking Ahead: Implementation and Future Prospects
The new Curated Module v2 is now live, and the critical stake migration from the legacy Curated Module is slated to commence shortly. Given the current Ethereum activation queue, which often exceeds 40 days, this migration process is expected to be gradual. The original Curated Module will remain available as a fallback during this period and will be progressively wound down as stake successfully migrates to CMv2.
Concurrently, the Identified DVT Clusters (IDVTC) operator type is also live, with the first eligible operators actively claiming this status. The application window for the next IDVTC assessment round closes on September 21, while applications for the Identified Community Staker status close on September 7, providing ample time for prospective operators to prepare their applications and cluster formations. Interested parties can apply for ICS and IDVTC via csm.lido.fi/type. A comprehensive assessment calendar, detailing all upcoming application deadlines through the end of 2026, is available on the Research Forum.
The successful implementation of this Lido Core upgrade lays a robust foundation for future innovations. Looking ahead, Lido is poised to continue exploring advanced modular staking solutions, further refining its operator economics, and actively integrating with upcoming Ethereum protocol upgrades. These ongoing efforts underscore Lido’s commitment to maintaining its leadership in liquid staking, fostering a more decentralized and resilient Ethereum, and providing its users with secure and efficient staking opportunities. The roadmap suggests a continuous cycle of improvement, adapting to both technological advancements and the evolving needs of the decentralized finance landscape.
