Lido v2 Upgrade Promises to Thin Ethereum's Validator Herd by a Third 🐂

Lido, the liquid staking protocol behind the stETH token, unveiled an upgrade to its staking infrastructure on Monday aimed at boosting validator efficiency and decentralization. The release, called Curated Module v2, adds support for Ethereum's 0x02 withdrawal credentials and permits validators to raise their effective balance from 32 ETH to as much as 2,048 ETH, according to a Lido update.

Under the protocol's projections, the migration could reduce Ethereum's validator count from roughly 880,000 to about 628,000, a decline of approximately one-third. Lido cautioned that the migration has not yet started and that the figures remain projections rather than confirmed outcomes. The change is expected to affect Ethereum's consensus layer by trimming the number of validators and the validator messages required to keep the network running, while leaving execution-layer activity, and therefore transaction fees and gas costs, unchanged.

The upgrade also introduces new accountability mechanisms for Lido's node operators, including bonding and penalty systems. Lido said future stake distribution could place greater weight on operator performance, fees and contributions to Ethereum's ecosystem. "Curated Module v2 is the next major step in that evolution," Lido said, describing the release as bringing new operator incentives, bond-based security features and governance improvements.

Lido emphasized that no action is required from stakers, as the upgrade will be handled at the protocol level. Separately, market research firm CryptoQuant noted that Ethereum is nearing a market bottom against Bitcoin, though it said key signals remain unconfirmed.