James Watt
Lido Core, the foundational liquid staking infrastructure for the Lido protocol, has rolled out a significant upgrade, fundamentally enhancing its staking modules to bolster protocol health, improve sustainability, and deepen its alignment with Ethereum’s ongoing roadmap. This comprehensive evolution also introduces advancements in decentralization, benefiting both the Lido ecosystem and the broader Ethereum network. For stakers, this protocol-level upgrade requires no action; the improvements are seamlessly integrated into the existing system.
Understanding Lido Core’s Evolution
Lido Core serves as the primary mechanism through which user-deposited ETH is algorithmically distributed to validators managed by a diverse array of Node Operators (NOs). These operators, ranging from permissioned entities to permissionless participants, contribute to the security and stability of the Ethereum network. The term "Lido Core" was established to differentiate this foundational, single-pooled architecture from newer modular staking primitives, such as stVaults, which were introduced as part of the Lido V3 launch in December 2025, marking a strategic shift towards more flexible and specialized staking solutions.
"The evolution of Lido Core is a testament to our commitment to adapting alongside Ethereum," stated Isidoros Passadis, Chief of Staking at Lido Labs Foundation. "These upgrades are not merely incremental; they represent a proactive step to future-proof Lido, ensuring it remains robust, decentralized, and perfectly aligned with Ethereum’s long-term vision. We are building for resilience and responsible growth."
Curated Module v2: A Cornerstone Revitalized
The Curated Module has been the bedrock of Lido’s validator set since its inception in 2020, consistently securing a substantial portion of staked ETH within Lido Core—approximately 90% as of July 2026. Recognizing the dynamic nature of Ethereum staking, Lido contributors have continuously worked to advance these modules, ensuring not only alignment with Ethereum’s roadmap but also the long-term sustainability of the protocol.
Curated Module v2 (CMv2) represents the next pivotal phase in this ongoing evolution. It introduces a sophisticated market-driven operator economics framework, streamlines operational processes, and integrates novel mechanisms alongside dedicated Node Operator types. These innovations are designed to empower operators, fostering greater contributions to Ethereum’s decentralization and overall network health. The introduction of CMv2 will unfold in two distinct phases to ensure smooth adoption and integration across the network.
0x02 Native Support and Validator Consolidation
A cornerstone feature of CMv2 is its native support for 0x02 Withdrawal Credentials (WC). This capability, first introduced to the broader Ethereum network via the Pectra upgrade, and later by Lido through stVaults, allows validators to significantly increase their maximum effective balance from 32 ETH to 2,048 ETH. This technical advancement is crucial for optimizing network efficiency and reducing the operational footprint of staking.
The integration of 0x02 WC into the Curated Module enables the migration of over 265,000 existing Curated Module validators from the legacy 0x01 WC to the more efficient 0x02 standard through validator consolidations. This migration 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 reduce the total number of validators across the Ethereum network by approximately one-third, from around 880,000 at the time of writing to an estimated 628,000 post-consolidations, not accounting for new validators or other independent consolidation efforts.
The implications of this large-scale migration are profound. By significantly reducing the sheer volume of validators, the network is expected to experience a meaningful reduction in congestion and a lighter load on the Consensus Layer specifically. This strategic alignment with Ethereum’s roadmap is anticipated to bring down the number of attestation messages—critical votes by validators confirming the state of the blockchain—by approximately 29% each epoch. Such a reduction enhances network performance, reduces computational overhead, and contributes to a more scalable and resilient Ethereum.
Diversified Node Operator Types and Enhanced Incentives
Moving beyond a uniform approach, CMv2 introduces a sophisticated operator classification system that better acknowledges 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, support for Ethereum public goods, and overall decentralization efforts.
This framework categorizes operators based on their unique contributions, which are now directly reflected in the Curated Module v2 incentive structure. This ensures that operators whose activities align with the long-term health and decentralization of both the Lido protocol and Ethereum are appropriately rewarded, fostering a symbiotic relationship.
This formalized approach builds upon years of Lido DAO’s initiatives to support vital Ethereum client teams and public-good builders through participation in the Curated Module and dedicated LEGO grants. As of July 1, 2026, seven client teams have been onboarded as Curated Node Operators, collectively receiving approximately 8,710 stETH—equivalent to roughly $21 million—in cumulative rewards for operating validators on behalf of Lido stakers. This funding directly supports the ongoing development of critical Consensus Layer (CL) and Execution Layer (EL) clients, which are indispensable for Ethereum’s continued evolution.
Beyond direct financial support, concerted efforts by contributors and Node Operators since The Merge have focused on improving client, geographic, and infrastructure diversity. This dedication has steadily reduced the protocol’s reliance on any single client, geographical region, or cloud provider, significantly enhancing the resilience and decentralization of the broader Ethereum network. By actively fostering a balanced usage of diverse infrastructure, Lido continues to strengthen Ethereum’s overall health and network robustness, a commitment transparently tracked through the Validator and Node Operator Metrics (VaNOM) dashboard.
Robust Bonding and Penalty Mechanisms
The original Curated Module, launched in 2020, operated largely on a foundation of trust and operator reputation, expecting high performance and self-correction in the event of losses. As the staking ecosystem has matured, CMv2 introduces advanced mechanisms to further align operator incentives with staker interests and protocol robustness.
A key enhancement is the introduction of ETH-backed bonding. This mechanism requires Node Operators to stake a certain amount of ETH as collateral, which serves as a financial guarantee of their commitment and performance. Complementing this is a comprehensive Penalty Framework, designed to address instances of operator underperformance, operational downtime, slashing events (penalties for misbehavior), or violations related to EL rewards.
Rather than replacing the established reputation-based model, CMv2 integrates these new bond-based security and accountability mechanisms. This hybrid approach ensures a higher degree of financial security for stakers and the protocol, reinforcing operator behavior alignment and significantly strengthening Lido Core’s overall resilience against potential risks.
Streamlined Governance and Simplified NO Management
Under the previous Curated Module design, even routine administrative changes, such as updating an operator’s address, necessitated on-chain DAO votes. This process often led to increased operational overhead and potential delays in responding to time-sensitive matters.
Curated Module v2 addresses this by streamlining governance. It permissioned routine operational updates and administrative tasks, delegating them to Node Operators and the newly established Curated Module Committee (CMC), respectively. While operational efficiency is greatly improved, the DAO retains overarching authority over the composition of the Node Operator set and parameters related to Node Operators. Crucially, the DAO maintains the power to override or veto changes when deemed necessary, ensuring continued security and oversight. This approach significantly reduces the DAO’s administrative burden and reliance on off-chain coordination, without compromising the security and decentralized nature of the protocol.
"These architectural changes in CMv2 are about optimizing for speed and security," commented Aleksandra Gusakova, Lido Core Product Lead at Lido Labs Foundation. "By delegating routine tasks, we empower our Node Operators and the CMC to respond more agilely, while maintaining the DAO’s ultimate control over strategic decisions. It’s a leap forward in governance efficiency, designed to scale with Ethereum’s growth."
Lido CSM v3: Empowering Permissionless Staking
Following 1.5 years of intensive real-world testing and operation, the Community Staking Module (CSM) has firmly established itself as a highly scalable and reliable avenue for permissionless staking within the Ethereum ecosystem. Today, CSM stands as the largest alternative to vanilla solo staking, 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, underscoring its significant role in fostering decentralization.
The evolution of Lido’s permissionless staking continues with the Lido Core upgrade, as CSM transitions to version 3. This upgrade aims to make the module even more resilient and operator-friendly. Alongside several under-the-hood technical optimizations, CSM v3 introduces primary new features specifically designed to benefit permissionless operators. These enhancements include the introduction of Identified DVT Clusters (IDVTC), providing a structured pathway for DVT-enabled operators, and a suite of improvements aimed at simplifying operator onboarding and management. Further details on IDVTC and other options are available on lido.fi/csm, allowing prospective operators to compare available participation paths against traditional solo staking.
Simple DVT Module: A Strategic Transition
The Simple DVT Module (SDVTM) played a crucial role in advancing Distributed Validator Technology (DVT) adoption within Lido and the broader Ethereum ecosystem. Its innovative design allowed for a significant expansion of the number of participating Node Operators in Lido Core, bringing in over 300 new operators and substantially enhancing the diversity and decentralization of Lido’s validator set.
However, following a recent Snapshot vote, the 72 regular clusters within the Simple DVT Module have been systematically wound down. This decision reflects a strategic pivot, optimizing resource allocation and consolidating DVT efforts into more integrated frameworks. 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 the Identified DVT Clusters (IDVTC) operator type, joining existing Identified Community Staker (ICS) clusters, or forming new ICS clusters.
In recognition of their pioneering contributions to DVT adoption and protocol growth, the Lido DAO has also approved a grant framework for operators who participated in the Simple DVT regular clusters. Details regarding these grants are available in the relevant Research Forum post, underscoring Lido’s commitment to its operator community during transitions.
It is important to note that 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. They will continue to operate 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 evaluations based on evolving market conditions and future governance decisions.
Looking Ahead: Implementation and Future Vision
The new Curated Module v2 is now live, and the critical stake migration process from the legacy Curated Module is slated to commence shortly. Given the current Ethereum activation queue, which can extend beyond 40 days, this migration will be a phased and deliberate process. The original Curated Module will remain available as a fallback mechanism and will be gradually decommissioned as stake successfully transitions to CMv2.
Concurrently, the Identified DVT Clusters operator type is also live, and the first eligible operators are now able to claim this new 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. Similarly, applications for the Identified Community Staker status will close on September 7, allowing for cluster formation and readiness. Interested operators can apply for ICS and IDVTC via csm.lido.fi/type. A comprehensive assessment calendar detailing all upcoming application deadlines through the end of 2026 is available on the Research Forum.
Looking further ahead, Lido’s strategic roadmap includes the continued development of modular staking primitives, exploring further decentralization of the operator set, and enhancing the overall resilience of the protocol. This commitment ensures Lido remains at the forefront of liquid staking, adapting to Ethereum’s evolving needs while upholding its core values of security, decentralization, and accessibility. These upgrades collectively represent a significant step in reinforcing Lido’s position as a robust and future-proof liquid staking solution, deeply integrated with and contributing to the health of the broader Ethereum ecosystem.
