Ethereum News
Lido V3 modular architecture changes staking economics
Lido V3 changes the protocol from a single pool into a modular infrastructure through stVaults. These opt-in contracts allow stakers to delegate stake to chosen operators under specific terms regarding fees, management of keys, and insurance. The existing 1:1 staking path continues through the Core Pool. This architecture separates validator selection from the liquidity layer to expand the market for stETH. The rollout follows three phases to manage risk. Phase 1 limits stETH minting through stVaults to 3% of the total value locked and uses permissioned node operators. Phase 1 also sets a per-operator cap of 50,000 stETH. Phase 2 increases the global cap to 30% of the total value locked and requires 30 days with zero incidents. Phase 3 enables minting for all vaults according to the risk framework. The stVaults Committee monitors performance and manages parameters like reserve ratios and per-operator caps. Users choose between infrastructure fees, reservation liquidity fees, and liquidity fees. The global cap on stVault usage is 3 million ETH, and all stETH minting remains subject to a 150,000 stETH per day moving window limit. The risk assessment framework ensures stVault users do not negatively affect stETH holders. Lido V3 and the permissionless CSM transition is the mechanism that addresses the tension between validator diversity and liquidity.
The Community Staking Module (CSM) provides permissionless entry for independent stakers and community operators. This module allows participants to run validators using an ETH-based bond instead of the 32 ETH needed for traditional solo staking. A new operator submits 2.4 ETH for their first validator, while those on the Early Adoption list use 1.5 ETH. Subsequent validators cost 1.3 ETH each. The removal of the 12-validators-per-node-operator limit allows operators to scale their contributions; this change allows independent node operators to increase their impact on network decentralization without being restricted by previous caps. CSM operators can earn up to 2.3x more rewards than traditional solo staking because the protocol provides the remaining balance. CSM v2 introduces a new architecture including the CSModule for managing information and CSAccounting for handling bonds and rewards. The CSFeeDistributor contract stores non-claimed rewards and transfers excess rewards back to the Lido treasury. The CSFeeOracle contract executes the CSM Oracle report to transform non-distributed rewards into non-claimed rewards. The module capacity is 2% of the Lido TVL. CSM is integrated with Obol DVT, with 150+ operators using it. The CSVerifier contract validates CL data proofs using EIP-4788, while CSParametersRegistry stores node operator type parameters.
| CSM Bond Requirement | Amount (ETH) |
|---|---|
| First validator (General) | 2.4 |
| First validator (Early Adopter) | 1.5 |
| Subsequent validators | 1.3 |
| Rollout Phase | Global Minting Cap | Operator Type |
|---|---|---|
| Phase 1 | 3% TVL | Permissioned |
| Phase 2 | 30% TVL | Identified |
| Phase 3 | 30% TVL | Permissionless |
The NodeOperatorsRegistry tracks data for each operator, including staking limits, reward addresses, and validator public keys. The Lido DAO manages the network through this registry, including the ability to deactivate misbehaving operators or set target validator counts. If an operator fails to exit a validator following a request from the ValidatorsExitBusOracle, the DAO applies sanctions. The registry tracks targetValidatorsCount and targetLimitMode, where modes include 0 for disabled, 1 for smooth exit, and 2 for boosted exit. The LDO token manages the treasury and node operator registries. However, the token distribution carries centralization risks because founding members held 64% of the initial 1 billion tokens. This concentration prompted the DAO to propose a $20 million LDO buyback in early 2026 to stabilize the market. Lido’s market share is 21.2%, which is a drop from the 23.93% recorded at the start of the year. The registry also tracks totalVettedValidators, totalExitedValidators, and totalAddedValidators to maintain an accurate history of each operator. The getRewardDistributionState function provides information on whether rewards are in the TransferredToModule, ReadyForDistribution, or Distributed state.
Lido V3 includes specialized validator setups like DVT clusters and restaking sidecars. stVaults allow for customized validation parameters and fee structures. The CSM has expanded to include over 330 independent node operators who use various tools to manage their infrastructure. Dappnode provides an interface to generate keystores and upload deposit data. It also includes an Ejector service that automatically exits validators and sends Telegram notifications to the operator. Dappnode requires users to select at least one relay to ensure they do not propose vanilla blocks. Sedge provides a workflow to generate validator keys and set up full nodes with MEV relay settings. Sedge users can run the sedge keys command to generate keys and the sedge lido-status command to monitor the Node Operator ID. Sedge also includes a monitoring stack using Grafana and Prometheus to track performance and penalties. How will the protocol manage the increased complexity of managing hundreds of independent vaults?
