James Watt
Lido Finance, a leading liquid staking protocol, has announced a significant upgrade to its core infrastructure, Lido Core, marking a pivotal evolution in its commitment to Ethereum’s decentralization, network health, and long-term sustainability. This comprehensive protocol enhancement introduces major improvements across its staking modules, aligning Lido more closely with Ethereum’s ongoing roadmap and reinforcing its position as a robust staking solution. Notably, existing stakers are not required to take any action, as the upgrade is handled entirely at the protocol level, ensuring a seamless transition for all participants.
The Strategic Imperative: Evolving with Ethereum
Lido Core serves as the foundational liquid staking infrastructure of the Lido protocol, responsible for algorithmically allocating user-deposited ETH to a diverse network of validators managed by both permissioned and permissionless Node Operators (NOs) through various Staking Modules. This term was established to differentiate the protocol’s foundational architecture – a single pooled model – from new modular staking primitives like stVaults, which were introduced with Lido V3 in December 2025. The current upgrade reflects Lido’s proactive approach to adapting to the dynamic landscape of Ethereum staking, ensuring the protocol remains at the forefront of innovation and security.
Isidoros Passadis, Chief of Staking at Lido Labs Foundation, emphasized the strategic importance of this evolution: "Lido Core’s latest upgrade is a testament to our unwavering commitment to Ethereum’s health and decentralization. By introducing advanced features like 0x02 withdrawal credentials, refined operator economics, and robust accountability mechanisms, we’re not just improving Lido; we’re actively contributing to a more resilient, efficient, and decentralized Ethereum network for everyone." This sentiment underscores the collaborative spirit between Lido’s development and the broader Ethereum ecosystem.
Curated Module v2: A New Era for Lido’s Cornerstone
The Curated Module has been the bedrock of Lido’s validator set since its inception in 2020, currently securing approximately 90% of all staked ETH within Lido Core as of July 2026. Recognizing the continuous evolution of Ethereum staking, Lido contributors have developed Curated Module v2 (CMv2) as the next major advancement. This upgrade introduces 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 efforts. The introduction of CMv2 will proceed in two carefully managed phases to ensure smooth adoption and stability.
0x02 Native Support and Validator Consolidation: Boosting Efficiency
A cornerstone of the CMv2 upgrade is the native support for 0x02 Withdrawal Credentials (WC), a feature initially introduced by the Pectra upgrade to Ethereum. The Pectra upgrade, a crucial step in Ethereum’s post-Merge development, enabled validators to significantly increase their maximum effective balance from 32 ETH to 2,048 ETH, alongside other consolidations. While Lido initially rolled out 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 the legacy 0x01 WC to the more efficient 0x02 standard through 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 Core, increasing it from 32.06% to an impressive 52.21%. More broadly, this strategic consolidation is expected to reduce the total number of active 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-consolidations (excluding new validators or other consolidations).
The implications of this reduction are far-reaching. By decreasing the sheer volume of validators, this migration is anticipated to meaningfully lower network congestion and significantly reduce Consensus Layer overhead. This alignment with Ethereum’s roadmap is not merely technical; it contributes to a more sustainable and performant network. Once completed, the migration is expected to bring down the number of attestation messages across the network by approximately 29% each epoch, freeing up valuable network resources and improving overall responsiveness. This efficiency gain underscores Lido’s active role in optimizing the foundational layer of Ethereum.
Diversifying the Validator Landscape: New Node Operator Types
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 allows for the recognition of varying levels of contribution to protocol growth, infrastructure resilience, Ethereum public goods, and overall decentralization. These contributions are now directly integrated into the Curated Module v2 incentive structure, creating a more equitable and sustainable ecosystem where both the Lido protocol and Ethereum can mutually thrive.
This framework formalizes a long-standing commitment by the Lido DAO to support public goods within the Ethereum ecosystem. For instance, seven prominent Ethereum client teams have been onboarded as Curated Node Operators, receiving cumulative rewards of 8,710 stETH (approximately $21 million at July 2026 valuations) for operating validators on behalf of Lido stakers. This direct financial support aids in the continued development and maintenance of critical Consensus Layer (CL) and Execution Layer (EL) clients, which are vital for Ethereum’s ongoing stability and evolution.
Furthermore, efforts to improve client, geographic, and infrastructure diversity have been a sustained focus since the Merge. Coordinated initiatives have systematically reduced Lido’s reliance on any single client, geographical region, or cloud provider. This strategic diversification significantly enhances the resilience of the Lido protocol and, by extension, the broader Ethereum network against potential single points of failure. By fostering balanced usage across various infrastructure components, Lido continues to strengthen Ethereum’s overall health and network robustness. Detailed progress on these fronts can be explored through the Validator and Node Operator Metrics (VaNOM) dashboard, which offers a comprehensive view of the achievements over the past five years.
Enhanced Security and Accountability: Bonding and Penalty Mechanisms
The original Curated Module, launched in 2020, operated on a model primarily built on trust, where operator reputation served as the main guarantee of alignment and reliability. Curated Node Operators were expected to adhere to high performance standards and were implicitly responsible for compensating stakers and the protocol in the event of losses. As the staking ecosystem has matured, CMv2 introduces critical advancements in accountability and security.
This upgrade integrates ETH-backed bonding and a comprehensive Penalty Framework. These mechanisms enable financial coverage in cases of operator underperformance, operational downtime, slashing events, or violations related to EL rewards. Crucially, these new bond-based security and accountability mechanisms do not replace the existing reputation-based model but rather complement it. This hybrid approach significantly strengthens Lido Core’s robustness by better aligning operators’ economic incentives with the interests of stakers, thereby mitigating risks and fostering greater confidence in the protocol.
Streamlined Governance and Simplified Node Operator Management
Previously, the design of the Curated Module necessitated on-chain votes even for routine administrative adjustments, such as updating an operator’s address. This process not only increased operational overhead for the DAO but also introduced potential delays in responding to time-sensitive matters. Curated Module v2 addresses these inefficiencies by streamlining governance.
Routine operational updates and administrative tasks are now permissioned to Node Operators themselves and the newly established Curated Module Committee (CMC), respectively. While operational agility is enhanced, the DAO retains overarching authority over the composition of the Node Operator set and parameters related to Node Operators. The DAO also maintains the crucial ability to override or veto any changes when deemed necessary, ensuring that decentralized governance principles are upheld without sacrificing operational efficiency. This innovative approach reduces the DAO’s reliance on cumbersome off-chain coordination while maintaining robust security and oversight mechanisms. Aleksandra Gusakova, Lido Core Product Lead at Lido Labs Foundation, highlighted this balance: "The streamlined governance in CMv2 is a game-changer. It allows for more agile responses to operational needs while preserving the DAO’s ultimate authority, striking a vital balance between efficiency and decentralized control."
Lido CSM v3: Empowering Permissionless Staking
Beyond the Curated Module, the Community Staking Module (CSM) has also seen significant evolution with the release of CSM v3. After 1.5 years of real-world battle-testing, the 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, currently 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, showcasing its substantial contribution to Ethereum’s decentralization.
The evolution of CSM as part of the Lido Core upgrade aims to make it even more resilient and operator-friendly. Alongside several under-the-hood technical optimizations, CSM v3 introduces primary new features designed to benefit permissionless operators, including enhanced participation pathways and improved economic models. While specific details on all new features were not fully elaborated, the focus is clearly on fostering greater accessibility and sustainability for community stakers. More information regarding participation pathways, including Identified DVT Clusters (IDVTC), and a comparison of available options, is available on lido.fi/csm.
Transitioning from the Simple DVT Module
In a strategic move to further optimize Lido’s staking infrastructure, the 72 regular clusters within the Simple DVT Module (SDVTM) have been wound down, following a recent Snapshot vote by the Lido DAO. The Simple DVT Module played a crucial role in advancing Distributed Validator Technology (DVT) adoption across both Lido and the broader Ethereum ecosystem. Its introduction led to a significant expansion of participating Node Operators in Lido Core by more than 300, thereby making Lido’s validator set substantially more diverse and decentralized during its operational tenure.
Operators from the wound-down clusters are not left without options; a clear pathway has been established for them to continue validating through Lido via the Community Staking Module (CSM). This transition can be facilitated through several avenues, ensuring continuity for experienced operators. Furthermore, the Lido DAO has approved a dedicated grant framework to acknowledge the valuable contributions of operators who participated within the Simple DVT regular clusters, details of which are available in the relevant 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 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 assessed separately based on evolving market conditions and future governance decisions.
A Phased Rollout and Future Prospects
The new Curated Module v2 is now live, and the critical stake migration process from the legacy Curated Module is set to commence shortly. Given the current Ethereum activation queue, which can exceed 40 days, this migration will be a gradual process. The original Curated Module will remain available as a fallback during this transition and will be progressively wound down as stake successfully migrates to CMv2.
Concurrently, the Identified DVT Clusters (IDVTC) operator type is also live, allowing the first eligible operators to claim this status. Applications for the next IDVTC assessment round are scheduled to close on September 21, providing ample time for prospective operators to prepare their applications and cluster formations. Similarly, applications for the Identified Community Staker (ICS) status will close on September 7. A comprehensive assessment calendar detailing all upcoming application deadlines through the end of 2026 is available on the Research Forum, ensuring transparency and planning for all interested parties.
Looking ahead, Lido’s commitment to continuous innovation remains steadfast. This comprehensive upgrade to Lido Core not only addresses immediate needs but also lays a robust foundation for future developments. The focus will remain on further enhancing decentralization, improving protocol resilience, and fostering an even more inclusive and efficient staking ecosystem. By meticulously aligning its infrastructure with Ethereum’s evolving technical roadmap and empowering its diverse network of Node Operators, Lido Finance is poised to continue its leadership role in shaping the future of liquid staking and contributing significantly to the long-term health and success of the Ethereum network.
