James Watt
The Lido protocol, a leading liquid staking solution for Ethereum, has announced a significant evolution of its core infrastructure, introducing major improvements across its staking modules designed to enhance protocol health, strengthen decentralization, and align more closely with Ethereum’s ongoing development roadmap. This comprehensive upgrade, dubbed "Lido Core Evolution," introduces Curated Module v2 (CMv2) and Community Staking Module v3 (CSM v3), alongside the strategic winding down of the regular clusters within the Simple DVT Module. The protocol emphasizes that no action is required from existing stakers, as the entire upgrade process is managed at the protocol level.
Understanding Lido Core’s Foundational Role
At its heart, Lido Core represents the primary liquid staking infrastructure of the Lido protocol. It serves as the mechanism through which user-deposited ETH is algorithmically distributed to a diverse network of validators. These validators are operated by a mix of permissioned and permissionless Node Operators (NOs) across various staking modules. The term "Lido Core" itself was established to differentiate the protocol’s original, foundational architecture—a single pooled model—from newer, modular staking primitives like stVaults, which were introduced as part of the Lido V3 launch in December 2025.
Isidoros Passadis, Chief of Staking at Lido Labs Foundation, highlighted the continuous commitment to innovation: "Lido’s evolution is inherently tied to Ethereum’s. This latest upgrade isn’t just about technical improvements; it’s a strategic move to future-proof the protocol, ensuring it remains robust, decentralized, and perfectly aligned with the broader Ethereum ecosystem. We are building for the long term, enhancing both efficiency and resilience." This sentiment underscores a proactive approach to adapting to the dynamic landscape of Ethereum staking, which has seen rapid technological advancements and increasing demands for network stability and decentralization since the Merge.
Curated Module v2: A New Era for Lido’s Cornerstone
The Curated Module has historically been the bedrock of Lido’s validator set, responsible for securing approximately 90% of all staked ETH within Lido Core as of July 2026. Launched in 2020, it has been instrumental in Lido’s growth and its prominent position in the liquid staking market. The introduction of Curated Module v2 (CMv2) marks a pivotal advancement, integrating a market-driven operator economics framework, streamlining operational processes, and introducing new mechanisms alongside dedicated Node Operator types. These changes are designed to empower operators while bolstering Ethereum’s decentralization efforts. The rollout of CMv2 will occur in two strategic phases to ensure a seamless transition.
0x02 Withdrawal Credentials: Enhancing Efficiency and Network Health
A key feature of CMv2 is its native support for 0x02 Withdrawal Credentials (WC) and validator consolidations. The broader Ethereum network saw the introduction of 0x02 WCs with the Pectra upgrade, a development that enabled validators to significantly increase their maximum effective balance from 32 ETH to 2,048 ETH. While Lido initially incorporated 0x02 support with the launch of stVaults, 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 the legacy 0x01 WC to the more efficient 0x02 standard through a process of validator consolidation. This migration is projected to nearly double the share of ETH secured by compounding validators within Lido, increasing it from 32.06% to an estimated 52.21%. Crucially, this consolidation is expected to have a profound positive impact on the overall Ethereum network. By reducing the total number of validators across the network from approximately 880,000 at the time of this announcement to an estimated 628,000 post-consolidation (without accounting for new validators or other consolidations), CMv2 is anticipated to meaningfully alleviate network congestion and lower the Consensus Layer overhead. Specifically, it is expected to decrease the number of attestation messages across the network by approximately 29% each epoch, contributing to a more streamlined and efficient network operation. This move not only improves Lido’s operational efficiency but also demonstrates a clear commitment to aligning with Ethereum’s core development priorities.
Diversifying Node Operator Types and Incentives
Moving beyond a uniform approach, CMv2 introduces a sophisticated operator classification system that acknowledges and rewards the diverse contributions of Curated Node Operators. The new Node Operator Type Framework recognizes varying levels of commitment to protocol growth, infrastructure resilience, Ethereum public goods, and decentralization. While specific types were not detailed in the original brief, the framework aims to formalize distinctions, for example, between large-scale professional operators, infrastructure providers, and public-good contributors.
This framework directly influences the Curated Module v2 incentive structure, ensuring that contributions to Ethereum client teams, public-good builders, and efforts to improve client, geographic, and infrastructure diversity are appropriately recognized and rewarded. Lido DAO has historically supported these initiatives, with seven client teams onboarded as Curated Node Operators. As of July 1, 2026, these teams have collectively received 8,710 stETH—equivalent to approximately $21 million—in cumulative rewards for operating validators on behalf of Lido stakers. This ongoing support for critical infrastructure development highlights Lido’s role in fostering a healthier, more resilient Ethereum ecosystem by reducing reliance on any single client, geographic region, or cloud provider. The Validator and Node Operator Metrics (VaNOM) dashboard provides granular insights into the progress made in these diversification efforts over the past five years.
Strengthening Security with Bonding and Penalty Mechanisms
The original Curated Module, launched in the nascent stages of Ethereum staking, primarily relied on operator reputation as a guarantee of alignment and reliability. While effective for its time, the maturing staking ecosystem necessitates more robust security measures. CMv2 addresses this by introducing ETH-backed bonding and a comprehensive Penalty Framework. These mechanisms enable financial coverage in instances of operator underperformance, operational downtime, slashing events, or violations related to Execution Layer (EL) rewards.
This new framework doesn’t replace the existing reputation-based model but rather complements it, establishing a stronger, bond-based security and accountability layer. This dual approach ensures a deeper alignment of operators’ behavior with the interests of stakers and significantly enhances the overall robustness of Lido Core, providing greater confidence and security in the protocol’s operations.
Streamlined Governance and Node Operator Management
The previous design of the Curated Module required on-chain DAO votes for even routine administrative changes, such as updating an operator’s address. This imposed considerable operational overhead and could introduce delays in responding to time-sensitive issues. Curated Module v2 addresses this by streamlining governance processes. It permissions routine operational updates and administrative tasks directly to Node Operators and the newly formed Curated Module Committee (CMC), respectively. The Lido DAO, however, retains ultimate authority over the composition of the Node Operator set and critical parameters, maintaining the ability to override or veto changes when deemed necessary. This optimized approach significantly reduces DAO overhead and reliance on cumbersome off-chain coordination, striking a balance between efficiency and decentralized oversight. Aleksandra Gusakova, Lido Core Product Lead at Lido Labs Foundation, commented on this, stating, "Our goal with CMv2 is to empower our Node Operators while ensuring the protocol remains secure and responsive. By streamlining administrative processes, we’re making it easier for operators to contribute effectively, which ultimately benefits all stakers and the entire Ethereum network."
Lido CSM v3: Empowering Permissionless Staking
Beyond the Curated Module, Lido’s Community Staking Module (CSM) has emerged as a highly scalable and reliable permissionless staking avenue. After 1.5 years of real-world operation, CSM has proven itself, becoming the largest alternative to vanilla solo staking in the ecosystem. It currently secures 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 Lido Core upgrade further refines CSM, evolving it into CSM v3. This iteration is designed to be even more resilient and operator-friendly, bringing several technical optimizations and primary new features for permissionless operators. A notable addition is the introduction of Identified DVT Clusters (IDVTC). This new operator type is specifically designed for smaller, permissionless Distributed Validator Technology (DVT) clusters, enabling them to receive a higher share of protocol rewards. This incentivizes DVT adoption among a broader range of operators, further decentralizing the staking landscape within Lido. By offering enhanced rewards, CSM v3 seeks to attract more diverse participants to run DVT clusters, distributing validator responsibilities and minimizing single points of failure. The lido.fi/csm portal provides comprehensive information on IDVTC and other participation options, allowing prospective operators to compare and choose the most suitable path.
The Evolution of DVT: Simple DVT Module Transition
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 enabled a significant expansion of the number of participating Node Operators in Lido Core by over 300, making Lido’s validator set substantially more diverse and decentralized during a critical period of DVT development.
Operators from these wound-down clusters are not left without options; they have clear pathways to continue validating through Lido via the Community Staking Module (CSM). These pathways include transitioning to Identified DVT Clusters, forming Identified Community Stakers, or becoming general permissionless operators. To acknowledge their pioneering contributions, the Lido DAO has also approved a grant framework for operators who participated in the Simple DVT regular clusters, details of which are available on the Research Forum. This demonstrates Lido’s commitment to supporting its community during transitional phases. Importantly, the "Super Clusters" within the Simple DVT Module, which comprise Advanced Node Operators and members of the Curated Module running larger validator sets, remain unaffected by this change and will continue operating until their originally approved wind-down date. Their long-term future will be evaluated separately, considering market conditions and future governance decisions.
Broader Implications and Future Outlook
The comprehensive Lido Core upgrade signifies a crucial step in the protocol’s journey, aligning its operational capabilities with the evolving demands of the Ethereum network. The migration to 0x02 Withdrawal Credentials in CMv2 directly contributes to Ethereum’s efficiency by reducing network overhead, while the new Node Operator Type Framework and incentive structures promote a more diverse and resilient validator set. The enhanced security mechanisms, including ETH-backed bonding and a robust Penalty Framework, instill greater confidence in the protocol’s stability and accountability.
Furthermore, the advancements in CSM v3, particularly the introduction of Identified DVT Clusters, underscore Lido’s commitment to fostering permissionless and decentralized staking. By incentivizing DVT adoption among a wider array of operators, Lido is actively working to distribute power and reduce systemic risks within its staking pool, which in turn strengthens the decentralization of the broader Ethereum network. The strategic winding down of the Simple DVT Module’s regular clusters, coupled with clear migration paths and grants, reflects a mature and adaptive governance model, ensuring that pioneering efforts are recognized while the protocol evolves towards more efficient and scalable solutions.
This upgrade positions Lido not just as a liquid staking provider, but as a proactive contributor to Ethereum’s long-term health and decentralization goals. The focus on streamlined governance, enhanced operator accountability, and diversified participation paths are all critical elements in building a robust and sustainable decentralized finance ecosystem.
Implementation Timeline and Next Steps
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 extend beyond 40 days, this migration process is expected to be gradual. The legacy Curated Module will remain operational as a fallback during this period, progressively winding down as stake transitions to CMv2.
For permissionless operators, the Identified DVT Clusters (IDVTC) operator type is also live, allowing eligible operators to claim this status. Applications for the next IDVTC assessment round are open, with a closing date of September 21. Similarly, applications for the Identified Community Staker status will close on September 7, providing prospective operators ample time to prepare their submissions and cluster formations. A full assessment calendar outlining all upcoming application deadlines through the end of 2026 is available on the Lido Research Forum, ensuring transparency and timely information for all interested participants.
Looking ahead, Lido’s ongoing commitment to innovation will likely involve further refinement of these modules, exploration of new modular staking primitives, and continued collaboration with the Ethereum community to adapt to future protocol upgrades and market demands. The "Lido Core Evolution" is not merely an update but a clear statement of intent: to remain at the forefront of liquid staking, driven by principles of security, efficiency, and unwavering support for Ethereum’s decentralized future.
