A New Lido Core Upgrade for Protocol Sustainability and a Leaner Ethereum

TLDR:

Lido Core continues to evolve alongside Ethereum. This upgrade introduces major improvements across its staking modules, strengthening protocol health and sustainability, improving alignment with Ethereum's roadmap, while advancing decentralization that benefits both Lido and the broader ecosystem.

• Curated Module v2 introduces native support for 0x02 validators, bonding and penalty mechanisms, operator classification, and streamlined governance. It will gradually replace the legacy Curated Module as stake migrates to the new module.
• Community Staking Module expands permissionless participation with the new Identified DVT Cluster (IDVTC) operator type, alongside technical improvements that make the module more reliable and operator-friendly.
• Simple DVT Module refines to improve its long-term economic and operational sustainability.

No action is required from stakers. The upgrade is handled entirely at the protocol level.

About Lido Core

Lido Core is the main liquid staking infrastructure of the Lido protocol, where user-deposited ETH is algorithmically allocated to validators run by a diverse set of both permissioned and permissionless Node Operators (NO) through various Staking Modules. The term was established to distinguish the protocol’s foundational architectureーa single pooled modelーfrom new modular staking primitives (stVaults) launched as a part of Lido V3.

Curated Module v2: Evolving the Largest Lido Staking Module

The Curated Module has been the cornerstone of the Lido validator set since the protocol launched in 2020, securing around 90% of all staked ETH in Lido Core as at July 2026. As Ethereum staking continues to evolve, Lido contributors continue advancing the modules to keep Lido Core aligned with Ethereum's roadmap while ensuring long-term protocol sustainability.

Curated Module v2 (CMv2) is the next major step in that evolution, introducing the market-driven operator economics framework, streamlined operations, new mechanisms and dedicated Node Operator types that empower operators to strengthen Ethereum's decentralization.

To ensure smooth adoption the new module will be introduced in two phases:

• Phase 1: Core structural changes, including native 0x02 validators support, operator classification and improved incentive alignment, bond-based security and penalty mechanisms, and lower governance friction. 
• Phase 2: Flexible stake distribution mechanism, custom fees, and a strike system.

0x02 Native Support

The Pectra upgrade introduced 0x02 Withdrawal Credentials (WC) and consolidations, enabling validators to increase their maximum effective balance from 32 ETH to 2,048 ETH. The Lido protocol initially introduced 0x02 with the launch of stVaults in December 2025. Learn more about this novel modular staking primitive here.

Now, Curated Module v2 brings that capability to Lido Core largest staking module. This enables the migration of more than 265,000 existing Curated Module validators from legacy 0x01 WC to 0x02 through validator consolidations.

Curated validator migration will nearly double the share of ETH secured by compounding validators, increasing it from 32.06% to 52.21%. At the same time, it will reduce the total number of validators across the Ethereum network by roughly one third, from approximately 880,000 at the time of writing to ~628,000 post consolidations (not accounting for new validators that may join the network, or other consolidations).

By reducing the number of validators, this migration is expected to meaningfully lower network congestion and Consensus Layer overhead specifically, while further aligning the Lido protocol with Ethereum's roadmap. Once completed, it should bring down the number of attestation messages across the network by approximately 29% each epoch.

Node Operator Types

Rather than applying a one-size-fits-all model, CMv2 introduces operator classification that better reflects the diversity of Curated Node Operators. 

The new Node Operator Type Framework enables recognition of different levels of contribution to protocol growth, infrastructure resilience, Ethereum public goods and decentralization.

These types include:

• Decentralization Operators — entities that run Ethereum nodes across underrepresented geographies and diverse infrastructure and client combinations;
• Extra Effort Operators — operators contributing additional value to the protocol beyond validator operations: through capital participation, service roles (such as the Lido Oracle or Deposit Security Committee), and governance alignment through LDO holdings and voting activity.
• Public Good Operators — entities meaningfully involved in building and maintaining core Ethereum Consensus and Execution Layers (CL and EL) client software.

These contributions are now reflected in the Curated Module v2 incentive structure, helping ensure that both the Lido protocol and Ethereum continue to thrive together.

This framework formalizes an approach Lido DAO has been following for years, supporting Ethereum client teams and public-good builders through participation in the Curated Module and LEGO grants. To help sustain development of CL and EL clients, seven client teams were onboarded as Curated Node Operators. As of July 1, 2026, they have collectively received 8,710 stETH (~$21 million) in cumulative rewards for operating validators on behalf of Lido stakers. 

Beyond CL and EL development support, improving client, geographic, and infrastructure diversity has remained a sustained focus for contributors and Node Operators since the Merge. Coordinated efforts have steadily reduced the protocol’s reliance on any single client, geographic region, or cloud provider, contributing to a more resilient and decentralized Ethereum network.

By fostering balanced usage, Lido continues to strengthen Ethereum’s overall health and network resilience. Explore the Validator and Node Operator Metrics (VaNOM) dashboard, which provides a detailed view of the progress made over the past five years.

Bonding And Penalty Mechanisms

The legacy Curated Module was built on trust, relying on operator reputation as a primary guarantee of alignment and reliability. Curated Node Operators were expected to perform to a high standard and compensate stakers and the protocol if losses arose.

As the staking ecosystem matures, Curated Module v2 advances this alignment by introducing ETH-backed bonding and Penalty Framework that enable coverage in cases of operator underperformance, operational downtime, slashing, or EL rewards violations.

Rather than replacing the existing reputation-based model, CMv2 complements it with new bond-based security and accountability mechanisms, better aligning operators’ behavior with stakers and strengthening Lido Core robustness.

Streamlined Governance And Simplified NO Management

The current CM design requires on-chain votes even for routine administrative changes, such as updating an operator address. This increases operational overhead and can delay responses to time-sensitive matters.

Curated Module v2 streamlines governance by permissioning routine operational updates and administrative tasks to Node Operators and the Curated Module Committee (CMC) respectively. The DAO retains authority over the composition of the Node Operator set and parameters related to Node Operators and can override or veto changes when necessary.

This approach reduces DAO overhead and reliance on off-chain coordination, while maintaining the security and oversight.

Lido CSM v3

Following 1.5 years of real-world battle-testing, the Community Staking Module has proven itself as a highly scalable and reliable permissionless staking avenue. Today, it stands as the largest alternative to vanilla solo staking in the ecosystem, securing over 770,000 staked ETH across estimated 335 active operators, representing roughly 8.5% of Lido TVL and 1.9% of the total network stake.

However, the evolution of Lido’s permissionless staking continues. As part of the Lido Core upgrade, CSM is evolving to become even more resilient and operator-friendly. Alongside several under-the-hood technical optimizations, here are the primary new features that CSM v3 brings to permissionless operators:

• Identified DVT Clusters (IDVTC): This new Node Operator type creates a third pathway alongside the default and Identified Community Staker (ICS) options to utilize CSM. IDVTC empowers independent community stakers to run distributed validators via Obol or SSV using the most optimized parameters available in CSM to date:
  • Bond Requirements: A low 1.5 - 0.5 ETH bond per key.
  • Estimated Capital Efficiency: Up to 3.1x compared to solo staking.

To learn more about IDVTC and compare all available options, check out lido.fi/csm.

• Native Node Operator Reward Splitting: Node Operators can now configure multiple destination addresses to receive rewards, each with customized proportions. This native splitter provides a seamless experience for operators who need to distribute rewards across various individuals or entities. For example, a group running validators as an IDVTC can now manage reward allocations to individual cluster members directly via the CSM widget.
• Agile Governance for Permissionless Staking Share Limit: To allow the protocol to promptly react to market demand and scale permissionless staking capacity, traditional Aragon governance has been replaced with Easy Track. This enables faster increases to the module’s staking share limit.

Simple DVT Module: What's Changing

Following the recent Snapshot vote, the 72 regular clusters in the Simple DVT Module (SDVTM) have been wound down.

The Simple DVT Module played a pivotal role in advancing Distributed Validator Technology (DVT) adoption across both Lido and the broader Ethereum ecosystem. It allowed significant expansion of the number of participating Node Operators in Lido Core by more than 300, making Lido's validator set substantially more diverse and decentralized.

Operators from the wound-down clusters have a pathway to continue validating through Lido through the Community Staking Module (CSM) in one of three ways:

1. Default permissionless path.
2. ICS: Existing SDVTM solo and community stakers are eligible to claim ICS status if they choose to continue as solo operators.
3. IDVTC: Regular cluster participants, wishing to continue running DVT, can form new clusters. Compared with the Simple DVT cluster model, this approach allows operators to self-organize, and, in certain configurations, receive more favorable economic incentives than other CSM operator types.

On top of this, the Lido DAO approved a grant framework to recognize the contributions of operators that participated within the Simple DVT regular clusters. Grant details can be found in the Research Forum post.

Super Clusters

Super Clusters, which consist of Advanced Node Operators and members of the Curated Module running larger validator sets, are not affected by this change. They continue operating as planned until the originally approved wind-down date.

Their longer-term future, including a potential migration to another staking module or an earlier wind-down, will be evaluated separately based on market conditions and future governance decisions.

What's Next

The new Curated Module v2 is now live, and the stake migration from the legacy Curated Module will start soon. Given the current Ethereum activation queue of more than 40 days, this process will take time. The CM will remain available as a fallback and will gradually be wound down as stake migrates to CMv2.

The Identified DVT Clusters operator type is also live, and the first eligible operators can claim the type. Applications for the next IDVTC assessment round close on September 21, while applications for the Identified Community Staker status close on September 7, giving prospective operators time to prepare their applications and cluster formation. Apply for ICS and IDVTC here. For all upcoming application deadlines through the end of 2026, see the full assessment calendar on the Research Forum.

Looking Ahead

• Curated Module v2: Phase 2. With the foundations now in place, Lido contributors will continue preparing the second phase of CMv2. It will introduce mechanisms that move Lido closer to a market-driven staking model, where stake can flow dynamically between Node Operators based on transparent parameters such as fees, performance, and contributions to the ecosystem. Follow the discussion on the Research Forum to stay up to date with the latest proposals and development progress.
• 0x02 CSM. While this specific upgrade does not introduce permissionless 0x02 validator support within the current iteration of the CSM, the v3 codebase natively supports the credential  type. The Lido DAO has approved the launch of a dedicated module (0x02 CSM), targeted for Q4 2026, designed specifically to enable permissionless node operators using 0x02 withdrawal credentials. This new module will run alongside the existing CSM instance, offering operators full flexibility to choose their preference. To dive deeper into the solution, read the full 0x02 CSM Landscape.