James Watt
Lido Core, the foundational liquid staking infrastructure of the Lido protocol, has announced a significant upgrade, introducing substantial improvements across its staking modules. This pivotal evolution is designed to strengthen protocol health and long-term sustainability, enhance alignment with Ethereum’s ongoing roadmap, and further advance decentralization efforts that benefit both Lido and the broader Ethereum ecosystem. The comprehensive upgrade, which requires no action from existing stakers, is being handled entirely at the protocol level, ensuring a seamless transition for participants.
Background: Lido’s Role in Ethereum’s Staking Landscape
Since its inception in 2020, Lido has grown to become a dominant force in the liquid staking sector, providing users with a simple and accessible way to stake their Ethereum (ETH) while maintaining liquidity through the stETH token. Lido Core operates by algorithmically allocating user-deposited ETH to validators managed by a diverse set of Node Operators (NOs), encompassing both permissioned and permissionless entities. The term "Lido Core" was established to differentiate this foundational architecture—a single pooled model—from newer, modular staking primitives like stVaults, which were launched as part of Lido V3 in December 2025, marking a continuous drive towards innovation and adaptability within the protocol.
The necessity for such comprehensive upgrades stems from the dynamic evolution of the Ethereum network itself. Following transformative events like The Merge and subsequent network improvements, the landscape of Ethereum staking is constantly shifting. Lido’s commitment is to not only keep pace with these changes but to proactively contribute to the network’s resilience and decentralization. Isidoros Passadis, Chief of Staking at Lido Labs Foundation, underscored the significance of this moment, stating, "This evolution of Lido Core is a testament to our commitment to the long-term health of both Lido and Ethereum. By aligning our protocol more closely with Ethereum’s roadmap and empowering our Node Operators, we’re building a more robust and decentralized future for everyone."
Curated Module v2: A New Era for Lido’s Cornerstone
The Curated Module has been the bedrock of Lido’s validator set, securing approximately 90% of all staked ETH within Lido Core as of July 2026. Recognizing the evolving demands of Ethereum staking, the Curated Module v2 (CMv2) represents a major leap forward, introducing a market-driven operator economics framework, streamlined operations, and new mechanisms alongside dedicated Node Operator types. These enhancements are designed to empower operators, foster greater alignment, and ultimately strengthen Ethereum’s decentralization. The adoption of CMv2 will unfold in two strategic phases.
0x02 Native Support and Validator Consolidation
A cornerstone of CMv2 is the native integration of 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 0x02 WC and consolidation mechanisms. While Lido initially introduced 0x02 support with the launch of stVaults in late 2025, CMv2 now extends this critical capability to Lido Core’s largest staking module.
This integration facilitates the migration of over 265,000 existing Curated Module validators from legacy 0x01 WC to the more efficient 0x02 standard via validator consolidations. The impact of this migration is profound: 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%. More broadly, this consolidation is expected to significantly reduce the total number of validators across the entire Ethereum network by roughly one-third, from approximately 880,000 at the time of writing to an estimated 628,000 post-consolidation (excluding new validators or other consolidations).
The benefits of this consolidation are multifaceted. By reducing the sheer volume of individual validators, the migration is anticipated to meaningfully lower network congestion and specifically alleviate overhead on the Consensus Layer. This optimization is expected to decrease the number of attestation messages across the network by approximately 29% each epoch, contributing to a more efficient and scalable Ethereum. This move aligns the Lido protocol seamlessly with Ethereum’s long-term roadmap for network health and performance.
Diversified Node Operator Types and Enhanced Incentives
Moving beyond a uniform approach, CMv2 introduces a sophisticated Node Operator Type Framework that acknowledges and rewards the diverse contributions of Curated Node Operators. This framework categorizes operators based on their unique value proposition to protocol growth, infrastructure resilience, Ethereum public goods, and decentralization. The defined types include:
- Core Node Operators: Providing foundational, high-performance staking services.
- Community Node Operators: Fostering broader community participation and decentralization.
- Public Good Operators: Contributing to the development of Ethereum client software and other essential public infrastructure.
- Distributed Validator Operators: Leveraging Distributed Validator Technology (DVT) for enhanced security and fault tolerance.
These classifications are directly integrated into the Curated Module v2 incentive structure, ensuring that contributions to the collective health of both Lido and Ethereum are appropriately recognized and rewarded. This formalizes a long-standing commitment by the Lido DAO to support public-good builders and Ethereum client teams. As of July 1, 2026, seven client teams onboarded as Curated Node Operators have collectively received 8,710 stETH (approximately $21 million) in cumulative rewards for operating validators on behalf of Lido stakers. This strategic investment underscores Lido’s dedication to supporting the foundational layers of Ethereum.
Beyond direct financial incentives, Lido contributors and Node Operators have consistently focused on improving client, geographic, and infrastructure diversity since The Merge. Coordinated efforts have steadily reduced the protocol’s reliance on any single client, geographic region, or cloud provider, thereby enhancing the overall resilience and decentralization of the Ethereum network. By fostering balanced usage, Lido continues to strengthen Ethereum’s overall health and network robustness, with detailed progress viewable on the Validator and Node Operator Metrics (VaNOM) dashboard.
Strengthened Accountability: Bonding and Penalty Mechanisms
The legacy Curated Module operated largely on a trust-based model, where operator reputation served as the primary guarantee of alignment and reliability. While effective, the maturing staking ecosystem necessitates additional layers of security. Curated Module v2 addresses this by introducing ETH-backed bonding and a comprehensive Penalty Framework. These mechanisms provide coverage in instances of operator underperformance, operational downtime, slashing events, or violations related to Execution Layer (EL) rewards.
Rather than supplanting the existing reputation-based model, CMv2 strategically complements it with these new bond-based security and accountability measures. This hybrid approach ensures a stronger alignment of operator behavior with the interests of stakers and significantly bolsters the overall robustness of Lido Core.
Streamlined Governance and Simplified Management
The previous design of the Curated Module often required on-chain DAO votes even for routine administrative changes, such as updating an operator’s address. This process introduced operational overhead and could lead to delays in responding to time-sensitive matters. CMv2 streamlines governance by permissioning routine operational updates and administrative tasks to Node Operators and the newly established Curated Module Committee (CMC), respectively. The DAO retains its ultimate authority over the composition of the Node Operator set and parameters related to Node Operators, maintaining the ability to override or veto changes when deemed necessary. This approach effectively reduces the DAO’s operational burden and reliance on off-chain coordination, all while preserving the fundamental security and oversight mechanisms. Aleksandra Gusakova, Lido Core Product Lead at Lido Labs Foundation, commented on this evolution, stating, "This upgrade represents a significant step towards greater efficiency and decentralization. By empowering Node Operators with more streamlined management capabilities, we’re not only reducing operational friction but also reinforcing the robust security framework that underpins Lido Core."
Lido CSM v3: Empowering Permissionless Staking
The Community Staking Module (CSM) has, over 1.5 years of real-world battle-testing, emerged as a highly scalable and reliable permissionless staking avenue. Today, it stands as the largest alternative to vanilla solo staking within the ecosystem, securing over 770,000 staked ETH across an estimated 335 active operators. This represents approximately 8.5% of Lido’s Total Value Locked (TVL) and 1.9% of the total network stake, demonstrating its vital role in fostering broader participation.
As part of the Lido Core upgrade, CSM is evolving into version 3, designed to be even more resilient and operator-friendly. Alongside several under-the-hood technical optimizations, CSM v3 introduces key new features aimed at enhancing the experience for permissionless operators. A significant advancement is the introduction of Identified DVT Clusters (IDVTC), which integrates Distributed Validator Technology more deeply into the permissionless staking framework, offering enhanced security, fault tolerance, and operational flexibility for participants. This innovation aims to provide a robust and secure environment for a wider array of operators. Further details on IDVTC and other participation options are available on lido.fi/csm.
Strategic Realignment: Simple DVT Module Wind-Down
In a strategic move to optimize its DVT efforts, the 72 regular clusters within the Simple DVT Module (SDVTM) have been wound down following a recent Snapshot vote. The SDVTM played a crucial role in its time, significantly advancing Distributed Validator Technology (DVT) adoption across both Lido and the broader Ethereum ecosystem. It successfully expanded the number of participating Node Operators in Lido Core by over 300, thereby making Lido’s validator set substantially more diverse and decentralized.
The decision to wind down these clusters is part of a broader consolidation strategy, directing DVT efforts towards more integrated and scalable solutions within the CSM. Operators from the wound-down clusters are provided with clear pathways to continue validating through Lido via the Community Staking Module (CSM). These options include applying for Identified Community Staker (ICS) status, joining the new Identified DVT Clusters (IDVTC), or continuing as a vanilla CSM operator. Furthermore, the Lido DAO has approved a grant framework to acknowledge the valuable contributions of operators who participated within the Simple DVT regular clusters, with details outlined in the relevant Research Forum post.
It is important to note that Super Clusters, which consist of Advanced Node Operators and members of the Curated Module running larger validator sets, remain unaffected by this change. They 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 evaluated separately, contingent on market conditions and future governance decisions.
What’s Next: Rollout and Future Outlook
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 can exceed 40 days, this migration process will naturally take a considerable amount of time. During this transition, the legacy Curated Module will remain available as a fallback option and will be gradually wound down as stake successfully migrates to CMv2.
Concurrently, the Identified DVT Clusters operator type is also live, and the first eligible operators are now able to claim this status. Applications for the next IDVTC assessment round are set to close on September 21, providing prospective operators ample time to prepare their applications and cluster formations. Similarly, applications for the Identified Community Staker status will close on September 7. Interested parties can apply for both ICS and IDVTC via csm.lido.fi/type, with a full assessment calendar for upcoming application deadlines through the end of 2026 available on the Research Forum.
Looking ahead, Lido’s ongoing evolution is set to reinforce its position at the forefront of liquid staking. The focus will remain on enhancing the security, efficiency, and decentralization of its staking infrastructure. This includes continuous research into cutting-edge staking technologies, further integration of Distributed Validator Technology, and fostering an even more diverse and resilient Node Operator set. By consistently adapting to Ethereum’s advancements and proactively addressing the needs of its community, Lido aims to ensure the long-term health and prosperity of decentralized finance.
