James Watt
Lido Core, the foundational liquid staking infrastructure, has officially rolled out a significant upgrade across its staking modules, marking a pivotal moment in its evolution alongside the Ethereum network. This comprehensive update introduces major improvements designed to strengthen protocol health and sustainability, enhance alignment with Ethereum’s ongoing roadmap, and advance decentralization, benefiting both the Lido protocol and the broader Ethereum ecosystem. Importantly, no action is required from stakers, as the entire upgrade process is handled seamlessly at the protocol level.
A New Era for Liquid Staking Infrastructure
Since its inception in 2020, Lido has grown to become the dominant force in liquid staking, enabling users to stake their ETH while retaining liquidity through stETH tokens. At its heart lies Lido Core, the mechanism responsible for algorithmically allocating user-deposited ETH to a diverse network of validator Node Operators (NOs) through various staking modules. This core infrastructure has been meticulously developed to distinguish its single pooled model from newer, more modular staking primitives like stVaults, which were introduced with Lido V3 in December 2025. The latest upgrade reflects a continuous commitment to adapting to the dynamic landscape of Ethereum staking, ensuring Lido remains robust, efficient, and aligned with the network’s long-term vision.
Isidoros Passadis, Chief of Staking at Lido Labs Foundation, underscored the strategic importance of this development, stating, "The latest Lido Core upgrade is a testament to our ongoing commitment to a more resilient, decentralized, and efficient Ethereum staking ecosystem. By aligning with Ethereum’s technical evolution and empowering our Node Operators, we’re not just improving Lido; we’re strengthening the foundational layer of the entire network." This sentiment encapsulates the dual objectives of the upgrade: to optimize Lido’s internal operations while simultaneously contributing to the health of Ethereum itself.
Curated Module v2: A Cornerstone Reimagined
The Curated Module has been the bedrock of Lido’s validator set since the protocol’s launch, securing approximately 90% of all staked ETH within Lido Core as of July 2026. Recognizing the evolving demands of Ethereum staking, Lido contributors have continually sought to advance these modules, ensuring not only long-term protocol sustainability but also strict alignment with Ethereum’s roadmap. Curated Module v2 (CMv2) represents the next major evolutionary step, introducing a sophisticated market-driven operator economics framework, streamlined operational procedures, novel mechanisms, and specialized Node Operator types designed to empower operators and bolster Ethereum’s decentralization. The rollout of CMv2 is structured in two phases to ensure a smooth and effective transition.
One of the most significant advancements within CMv2 is the native support for 0x02 Withdrawal Credentials (WC). This feature, initially introduced to the Lido protocol with stVaults in December 2025 following the broader Pectra upgrade, is now extended to Lido Core’s largest staking module. The Pectra upgrade was a critical development for Ethereum, enabling validators to increase their maximum effective balance from 32 ETH to 2,048 ETH and facilitating consolidations. This integration within CMv2 will enable the migration of over 265,000 existing Curated Module validators from the legacy 0x01 WC to the more efficient 0x02 standard through validator consolidations.
The implications of this migration are far-reaching. It 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%. Concurrently, this consolidation effort is expected to reduce the total number of active validators across the entire Ethereum network by roughly one third, dropping from approximately 880,000 at the time of writing to an estimated 628,000 post-consolidations (without accounting for new validators or other consolidations). This reduction is anticipated to meaningfully lower network congestion and significantly decrease Consensus Layer overhead. Specifically, it is expected to bring down the number of attestation messages across the network by approximately 29% each epoch, substantially improving network efficiency and aligning the Lido protocol even more closely with Ethereum’s overarching scalability roadmap.
Beyond technical upgrades, CMv2 introduces a crucial Node Operator Type Framework, moving away from a uniform model to one that better reflects the diverse contributions of Curated Node Operators. This framework acknowledges varying levels of contribution to protocol growth, infrastructure resilience, Ethereum public goods, and overall decentralization. By formalizing this classification, Lido can now tailor its incentive structure to reward specific contributions, ensuring that the protocol and Ethereum continue to flourish synergistically. This approach formalizes a long-standing practice of the Lido DAO, which has actively supported Ethereum client teams and public-good builders through participation in the Curated Module and LEGO grants. To date, seven client teams have been onboarded as Curated Node Operators, collectively receiving 8,710 stETH (approximately $21 million) in cumulative rewards by July 1, 2026, for their critical work in operating validators on behalf of Lido stakers. This commitment extends to fostering greater client, geographic, and infrastructure diversity, a sustained focus since The Merge, which has steadily reduced reliance on single points of failure, contributing to a more resilient and decentralized Ethereum network. Lido’s efforts in promoting balanced usage continue to strengthen Ethereum’s overall health and network resilience, with detailed progress visible on the Validator and Node Operator Metrics (VaNOM) dashboard.
Another significant enhancement in CMv2 is the introduction of ETH-backed bonding and a comprehensive Penalty Framework. The legacy Curated Module, while effective, largely relied on operator reputation as a primary guarantee of alignment and reliability, with operators expected to perform to high standards and compensate for losses. As the staking ecosystem matures, CMv2 complements this trust-based model with new bond-based security and accountability mechanisms. These mechanisms enable robust coverage in cases of operator underperformance, operational downtime, slashing events, or Execution Layer (EL) rewards violations. This dual approach of reputation and tangible collateral strengthens Lido Core’s robustness and ensures greater alignment between operator behavior and staker interests.
Furthermore, CMv2 streamlines governance and simplifies Node Operator management. The previous CM design often necessitated on-chain votes even for routine administrative changes, leading to increased operational overhead and potential delays in addressing time-sensitive matters. CMv2 addresses this by permissioning routine operational updates and administrative tasks to Node Operators and the newly established Curated Module Committee (CMC), respectively. The DAO retains ultimate authority over the composition of the Node Operator set and relevant parameters, with the power to override or veto changes when necessary. This innovative approach significantly reduces DAO overhead and reliance on off-chain coordination, all while maintaining stringent security and oversight. Aleksandra Gusakova, Lido Core Product Lead at Lido Labs Foundation, emphasized this holistic improvement, stating, "This comprehensive upgrade to Lido Core signifies a monumental leap forward in our pursuit of a robust and sustainable liquid staking ecosystem. By enhancing efficiency, strengthening security, and fostering greater decentralization, we are not only future-proofing Lido but also actively contributing to the long-term health and scalability of Ethereum itself."
Lido CSM v3: Empowering Permissionless Staking
Alongside the Curated Module, the Community Staking Module (CSM) has proven itself over the past 1.5 years as a highly scalable and reliable permissionless staking avenue. Today, CSM stands as the largest alternative to vanilla solo staking within the ecosystem, securing over 770,000 staked ETH across an estimated 335 active operators, representing approximately 8.5% of Lido’s Total Value Locked (TVL) and 1.9% of the total network stake.
The evolution of Lido’s permissionless staking continues with the Lido Core upgrade, as CSM is now evolving into CSM v3, designed to be even more resilient and operator-friendly. Beyond several under-the-hood technical optimizations, CSM v3 introduces primary new features aimed at enhancing the experience for permissionless operators. These improvements, which include Identified DVT Clusters (IDVTC) and other operational efficiencies, aim to lower barriers to entry for community stakers while maintaining high standards of performance and security. Prospective operators can explore these new options and compare them with other staking avenues at lido.fi/csm.
Transitioning from the Simple DVT Module
In a strategic move following a recent Snapshot vote, the 72 regular clusters within the Simple DVT Module (SDVTM) have been wound down. The SDVTM played a crucial role in advancing Distributed Validator Technology (DVT) adoption across both Lido and the broader Ethereum ecosystem. It significantly expanded the number of participating Node Operators in Lido Core by over 300, making Lido’s validator set substantially more diverse and decentralized during its operational period.
For operators affected by the wind-down, clear pathways have been established to ensure their continued participation within Lido. These operators can now transition to validating through the Community Staking Module (CSM) via several avenues, including self-organizing into new clusters or joining existing ones that meet the updated criteria. In recognition of their valuable contributions, the Lido DAO has also approved a grant framework to compensate operators who participated within the Simple DVT regular clusters, with detailed information available in the Research Forum post regarding the wind-down proposal. It is important to note that Super Clusters, which comprise Advanced Node Operators and members of the Curated Module running larger validator sets, are not affected by this change and will 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 market conditions and future governance decisions.
Looking Ahead: The Future of Staking
With the new Curated Module v2 now live, the phased stake migration from the legacy Curated Module is set to commence shortly. Given the current Ethereum activation queue, which often exceeds 40 days, this migration process will naturally take time. The original CM will remain available as a fallback option and will be gradually wound down as stake successfully transitions to CMv2.
The Identified DVT Clusters (IDVTC) operator type is also live, allowing the first eligible operators to claim their new status. Applications for the next IDVTC assessment round are scheduled to close on September 21, while applications for the Identified Community Staker (ICS) status will close on September 7, providing ample time for prospective operators to prepare their applications and cluster formations. A full assessment calendar outlining all upcoming application deadlines through the end of 2026 is available on the Research Forum, reflecting Lido’s commitment to continuous engagement and growth within its operator community.
This comprehensive upgrade to Lido Core represents more than just a technical update; it is a strategic repositioning that anticipates and addresses the future needs of Ethereum. By integrating advanced withdrawal credentials, fostering diverse operator incentives, strengthening security through bonding, and streamlining governance, Lido is not only enhancing its own protocol but also actively contributing to a more robust, scalable, and decentralized Ethereum network. The improvements are expected to increase overall network efficiency, reduce operational complexities for node operators, and provide stakers with a more secure and sustainable liquid staking experience, further solidifying Lido’s role as a key pillar in the decentralized finance landscape.
