James Watt
The Lido protocol, a leading force in Ethereum’s liquid staking landscape, has announced a significant upgrade to its core infrastructure, marking a pivotal moment in its ongoing commitment to Ethereum’s decentralization, sustainability, and operational efficiency. This comprehensive evolution, dubbed "Lido Core," introduces major improvements across its primary staking modules – the Curated Module v2 (CMv2) and the Community Staking Module v3 (CSM v3) – while strategically winding down elements of the Simple DVT Module (SDVTM). The upgrade is designed to fortify protocol health, align more closely with Ethereum’s evolving roadmap, and advance decentralization, benefiting both Lido and the broader Web3 ecosystem. Crucially, no action is required from existing stakers, as the entire upgrade is managed at the protocol level, ensuring a seamless transition.
Lido Core represents the foundational architecture of the Lido protocol, where user-deposited ETH is algorithmically distributed to validators managed by a diverse network of Node Operators (NOs) through various staking modules. This terminology was established following the launch of Lido V3 in December 2025, which introduced new modular staking primitives like stVaults, to differentiate the protocol’s core pooled model. Since its inception in 2020, Lido has grown to become a cornerstone of Ethereum’s proof-of-stake ecosystem, facilitating accessible and liquid staking for millions of users. The protocol’s continuous evolution is critical to maintaining its relevance and ensuring the long-term health of the Ethereum network, particularly as the blockchain undergoes further upgrades and optimizations.
Curated Module v2: A New Era for Lido’s Largest Staking Component
The Curated Module has historically served as the bedrock of Lido’s validator set, securing approximately 90% of all staked ETH within Lido Core as of July 2026. This makes its evolution, Curated Module v2 (CMv2), a monumental step. CMv2 introduces a sophisticated market-driven operator economics framework, streamlined operations, and new mechanisms alongside dedicated Node Operator types designed to empower operators and significantly bolster Ethereum’s decentralization. The implementation of CMv2 will occur in two distinct phases to ensure smooth adoption and stability.
A core enhancement within CMv2 is the native support for 0x02 Withdrawal Credentials (WC). This feature, initially rolled out with stVaults in December 2025 following Ethereum’s Pectra upgrade, enables validators to substantially increase their maximum effective balance from 32 ETH to 2,048 ETH through consolidations. Bringing this capability to the Curated Module facilitates the migration of over 265,000 existing Curated Module validators from legacy 0x01 WC to the more efficient 0x02 standard. This migration is projected to nearly double the share of ETH secured by compounding validators within Lido, moving from 32.06% to 52.21%.
The implications for the broader Ethereum network are profound. By consolidating validators, the total number of validators across the network is expected to decrease by roughly one-third, from approximately 880,000 at the time of writing to an estimated 628,000 post-consolidations, not accounting for new validators or other consolidations. This reduction is anticipated to meaningfully alleviate network congestion and decrease Consensus Layer overhead. Specifically, it is expected to lower the number of attestation messages across the network by approximately 29% each epoch, thereby enhancing overall network efficiency and aligning the Lido protocol more closely with Ethereum’s long-term roadmap. Isidoros Passadis, Chief of Staking at Lido Labs Foundation, highlighted this strategic alignment, stating, "The evolution of Lido Core is deeply intertwined with Ethereum’s roadmap. CMv2 is not just an upgrade for Lido; it’s a significant contribution to the broader health and scalability of the Ethereum network, reinforcing our commitment to its future."
Diversifying Node Operators and Bolstering Accountability
CMv2 moves beyond a one-size-fits-all model by introducing a comprehensive Node Operator Type Framework. This framework recognizes the diverse contributions of Curated Node Operators to protocol growth, infrastructure resilience, Ethereum public goods, and overall decentralization. By classifying operators based on their unique value propositions, the new incentive structure within CMv2 is designed to reward these varied contributions, fostering a more robust and decentralized validator set. This formalization builds upon Lido DAO’s long-standing support for Ethereum client teams and public-good builders, exemplified by the onboarding of seven client teams as Curated Node Operators. As of July 1, 2026, these teams have collectively received 8,710 stETH, valued at approximately $21 million, in cumulative rewards for their critical work in operating validators and supporting client development.
Beyond financial incentives, Lido’s sustained focus on improving client, geographic, and infrastructure diversity has been instrumental since the Merge. Coordinated efforts have steadily reduced the protocol’s reliance on any single client, region, or cloud provider, cultivating a more resilient Ethereum network. The Validator and Node Operator Metrics (VaNOM) dashboard provides granular insights into this progress, demonstrating Lido’s commitment to balanced usage and overall network health.
A significant shift in CMv2 is the introduction of ETH-backed bonding and a comprehensive Penalty Framework. The legacy Curated Module relied heavily on operator reputation as a primary guarantee of alignment and reliability. While reputation remains valuable, CMv2 complements this with robust, bond-based security mechanisms. These new frameworks enable financial coverage in instances of operator underperformance, operational downtime, slashing events, or Execution Layer (EL) rewards violations, better aligning operator behavior with staker interests and strengthening the overall robustness of Lido Core.
Furthermore, CMv2 streamlines governance and simplifies Node Operator management. The previous CM design necessitated on-chain votes for even routine administrative changes, creating operational overhead and potential delays. 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 Node Operator set composition and parameters, maintaining security and oversight while significantly reducing its own administrative burden and reliance on off-chain coordination. Aleksandra Gusakova, Lido Core Product Lead at Lido Labs Foundation, emphasized this improvement, stating, "Streamlining governance is vital for efficiency without compromising security. CMv2 empowers Node Operators and the CMC to handle routine tasks, allowing the DAO to focus on strategic decisions, ultimately making the protocol more agile and responsive."
Community Staking Module v3: Expanding Permissionless Opportunities
The Community Staking Module (CSM) has, over the past 1.5 years, proven itself 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 roughly 8.5% of Lido’s Total Value Locked (TVL) and 1.9% of the total Ethereum network stake. The Lido Core upgrade further enhances CSM, making it even more resilient and operator-friendly.
CSM v3 introduces several key features alongside various technical optimizations. One notable addition is the Identified DVT Clusters (IDVTC) operator type, which offers an advanced permissionless path for operators seeking enhanced security and decentralization through Distributed Validator Technology. This, combined with an improved assessment process and clearer pathways for participation, solidifies CSM’s role as a robust and accessible option for a wider range of permissionless operators. More details on IDVTC and other options are available at lido.fi/csm.
Strategic Transition: Winding Down the Simple DVT Module
While new modules are being introduced and enhanced, the Lido protocol is also undergoing a strategic wind-down of certain components. Following a recent Snapshot vote, the 72 regular clusters within the Simple DVT Module (SDVTM) have been retired. The SDVTM played a crucial role in advancing Distributed Validator Technology (DVT) adoption across Lido and the broader Ethereum ecosystem, significantly expanding the number of participating Node Operators by over 300 and enhancing the diversity and decentralization of Lido’s validator set during its operational period.
Operators from these wound-down clusters are not left without options; they have clear pathways to continue validating through the Community Staking Module (CSM). These include migrating to the Identified DVT Clusters (IDVTC), transitioning to the Identified Community Staker (ICS) type, or participating as a general permissionless operator. In recognition of their valuable contributions, the Lido DAO has also approved a grant framework for operators who participated in the Simple DVT regular clusters, with details outlined in the Research Forum post. It is important to note that Super Clusters, comprising Advanced Node Operators and Curated Module members running larger validator sets, are unaffected by this change and will continue operating as planned until their originally approved wind-down date. Their future, including potential migration or earlier wind-down, will be evaluated separately based on market conditions and subsequent governance decisions.
Broader Implications and Strategic Vision
The comprehensive Lido Core upgrade signifies a maturing liquid staking ecosystem and Lido’s proactive approach to aligning with Ethereum’s long-term vision. By introducing more efficient validator management, a more diverse and accountable Node Operator framework, and robust permissionless staking options, Lido is not only strengthening its own protocol but also contributing directly to the resilience and decentralization of the entire Ethereum network. The reduction in network congestion and attestation messages through 0x02 WC consolidation is a tangible benefit that impacts all Ethereum users. The formalization of incentives for public goods and client development reinforces Lido’s commitment to the foundational layers of Ethereum.
This upgrade reflects a continuous iterative process of development and adaptation, responding to both technological advancements within Ethereum (like the Pectra upgrade) and the evolving needs of its community. It underscores the strategic importance of liquid staking protocols in fostering a healthy, accessible, and decentralized Proof-of-Stake environment.
What’s Next: A Phased Rollout and Future Outlook
The new Curated Module v2 is now live, and the critical stake migration from the legacy Curated Module is set to commence shortly. Given the current Ethereum activation queue, which can exceed 40 days, this migration process will be gradual. The original Curated Module will remain available as a fallback during this period and will be progressively wound down as stake successfully transitions to CMv2.
Concurrently, the Identified DVT Clusters (IDVTC) operator type is also live, with the first eligible operators now able to claim this status. Prospective operators interested in IDVTC have until September 21 to submit their applications for the next assessment round. Similarly, applications for the Identified Community Staker (ICS) status close on September 7, providing ample time for preparation and cluster formation. Detailed application guidelines and the full assessment calendar through the end of 2026 are available on the Lido Research Forum and at csm.lido.fi/type.
Looking ahead, Lido contributors continue to explore further innovations, including the potential for additional modular staking primitives and enhanced mechanisms to promote greater decentralization and resilience across all facets of the protocol. This holistic upgrade positions Lido Core to continue its leadership in the liquid staking space, fostering a more robust, efficient, and decentralized Ethereum for years to come.
