Lido unveils Ethereum staking overhaul with validator consolidation plan

Lido has introduced a major upgrade to its Ethereum staking infrastructure that supports higher validator balances and projects a one-third reduction in validator count through its new Curated Module v2.

According to a Monday update from Lido, the latest version of its Curated Module adds support for Ethereum’s 0x02 withdrawal credentials, allowing validators to raise their effective balance from 32 ETH to as much as 2,048 ETH. 

The protocol said the change is designed to improve validator operations while continuing its push toward a more decentralized staking network.

Lido projects fewer Ethereum validators

Under the proposed migration, Lido estimates Ethereum’s validator count could decline from roughly 880,000 to about 628,000. The protocol said the migration has not yet started and stressed that the figures are projections based on its current modeling rather than live network data.

Lido said reducing the number of validators would lower the volume of validator messages processed on Ethereum’s consensus layer, making validator management more efficient. 

According to the protocol, the change does not alter activity on Ethereum’s execution layer, meaning transaction processing, gas fees, and user-facing network costs are not expected to change as a result of the upgrade.

No action is required from stETH holders because the migration will be handled at the protocol level, Lido said.

Curated Module v2 adds new rules for node operators

Alongside the infrastructure update, Lido has introduced new accountability measures for node operators participating in its curated staking module.

According to the protocol, Curated Module v2 includes bond requirements and penalty mechanisms intended to strengthen operator responsibility. Future stake allocation may also consider factors including operator performance, fee structures, and contributions to Ethereum’s ecosystem rather than relying solely on existing allocation methods.

Describing the release as the next stage in the protocol’s development, Lido said the upgrade combines new operator incentives with bond-backed security mechanisms and governance improvements that are intended to improve the operation of its validator set over time.

While validator balances can now grow well beyond Ethereum’s original 32 ETH limit through the updated withdrawal credentials, the protocol said the changes remain focused on validator management and do not modify Ethereum’s core staking rules.

Institutional use of Lido has continued to expand

The infrastructure upgrade follows several initiatives by Lido this year to strengthen its position across both retail and institutional staking markets.

Earlier this month, Anchorage Digital integrated Lido into its institutional platform, allowing clients to mint and burn wrapped staked Ether (wstETH) without moving assets outside the firm’s regulated custody environment. 

According to Anchorage Digital, the integration allows institutions to gain Ethereum staking exposure while continuing to use the custody, reporting, governance, and settlement systems already available on its platform.

At the time, Anchorage Digital co-founder and chief executive Nathan McCauley said liquid staking had become an important part of institutional participation in Ethereum because it reduces operational complexity while keeping assets within regulated custody.

Separately, Kean Gilbert, head of institutional relations at the Lido Ecosystem Foundation, said institutional demand for custody-based staking has increased as staking infrastructure and regulatory frameworks have matured. Gilbert also said Lido has spent more than $4 million on smart contract audits, received an A+ security rating from independent firms including Credora, and has operated without a smart contract exploit since launching in 2020.

According to Gilbert, Lido distributes staked Ether across more than 900 node operators, with no single operator responsible for more than 1% of the network, reducing reliance on individual participants.

Governance changes have accompanied protocol development

The latest infrastructure release follows governance initiatives introduced by the protocol earlier this year.

In March, Lido DAO proposed using up to 10,000 stETH from its treasury to conduct a one-time buyback of LDO tokens after describing the governance token as trading well below what it viewed as the protocol’s underlying fundamentals. The proposal called for purchases to be executed in 1,000 stETH batches, with token holders voting on each tranche before additional buybacks could proceed.

At the time, the DAO said Lido remained the largest liquid staking protocol on Ethereum with approximately 23% market share despite a decline in LDO’s market price. Financial figures released alongside the proposal showed protocol revenue fell 23% to $40.5 million during 2025, while operating costs improved 13% year over year and the protocol’s take rate increased from 5% to 6.11%.

The Curated Module v2 rollout adds another protocol-level update as Lido continues adjusting its staking infrastructure, governance framework, and institutional offerings while preparing for the migration to Ethereum’s updated validator credential system.