Lido V3: Customizable, Transparent, and More Decentralized ETH Staking - What You Need to Know
stVaults, DVT-first routing, Institutional-grade design & More
Lido has long been staking middleware for Ethereum, abstracting validator operations behind a single interface so any amount of $ETH can be delegated across hundreds of node operators while keeping liquidity via $stETH.
The v3 upgrade introduces stVaults, risk-isolated staking pools that can be tailored by institutions, DAOs, and community operators while still minting into stETH’s unified liquidity base. Alongside this, Lido v3 hardcodes DVT (Distributed Validator Technology) and Community Staking Module (CSM) into its stake routing, bringing more operators, client diversity, and resiliency to the validator set.
In this edition, we’ll cover Lido’s current position in the market, what v3 changes, and its institutional-grade design.
Stay informed in the markets ⬇
Lido Today: The Dominant Liquid Staking Layer
Since launching in 2020, Lido has grown into Ethereum’s largest staking protocol by TVL, with stETH as the most integrated liquid staking token in DeFi.
Market Share & Liquidity: Lido currently secures 26% of all staked ETH, with stETH maintaining deep liquidity across DEXs, lending markets, and L2s.
Utilization & yield: Base stETH APY has compressed with lower L1 execution fees (fewer gas/MEV windfalls), averaging ~3%–3.5% recently, but overall usage is sticky because stETH serves as “ETH with liquidity,” not a pure yield chase.
Operator set & routing: Since v2, the Staking Router modularized how stake is allocated (Curated set, SimpleDVT (SDVT), Community Staking Module). Lido now routes more stake into DVT (distributed validator tech) and CSM, increasing client/geographic diversity.
Fees & governance: Lido takes a 10% protocol fee on staking rewards on the Curated module (typically split 5% to node operators, 5% to the DAO). Lido’s recently introduced dual governance model splits power between LDO and stETH token holders.
In short, Lido today is both staking middleware and DeFi-native collateral, offering unmatched liquidity and integrations but with a validator set still largely dominated by professional operators.
Introduction to Lido v3
Lido v3 transforms the protocol from a single, unified staking pool into a staking platform with 2 distinct products:
1. Lido Core (The product everyone is familiar with) - The main stETH pool with stake routed to a curated set of professional node operators, backed by existing DeFi integrations and liquidity depth.
2. stVaults (New Configurable, Risk-Isolated Pools) - Dedicated, risk-isolated staking vaults that institutions, DAOs, or strategy managers can configure and mint stETH from. This ensures that bespoke setups won’t isolate liquidity in siloed wrappers which preserves stETH’s network effects for DeFi while letting institutions maintain vault-level controls (operator choice, custody, reward policy). Each vault can tailor:
Operator choice: pick specific node operators (in-house or third-party).
Custody model: custodial / non-custodial, segregated accounts for auditability.
Reward routing & validator policy: define reward distribution, MEV capture policy, and validator client mix.
Add-ons: opt into DVT, pre-confirmation, MEV strategies, and monitoring.
By integrating SDVT and CSM at the routing level, v3 accelerates decentralization while keeping stETH’s liquidity advantage intact which could expand Lido’s moat in both retail and institutional staking markets.
Inside the v3 Architecture
Each stVault is a separately accounted “mini-pool” with its own operator set and policy. If the owner enables stETH minting, the vault must respect safety rails:
Reserve Ratio (RR): a minimum on-vault collateral buffer to back stETH minting; protects the system if operators underperform or are penalized.
Forced-rebalance thresholds: if RR slips, the vault can auto-pause minting, rebalance, or re-collateralize before resuming.
Transparent accounting: validator selection, rewards, and fees are on-chain per vault, creating clean audit trails for internal risk teams and external auditor
v3 operationalizes Lido’s decentralization by creating new stake flows through Simple DVT and CSM over time. SDVT splits validator duties across independent operators/clients, reducing single-operator failure and correlated risk. CSM keeps the door open to solo/community operators with bonds and pooled EL/MEV smoothing, broadening the operator base beyond the curated set.
Rollout Timeline
Lido v3 is already running on Ethereum Holesky testnet, with multiple vault configurations actively trialed by operators and community stakers. Mainnet launch is targeted for October 2025, pending testnet stability and governance approval.
Important Links
Become a Premium member today to unlock all our research & reports.
Join thousands of sharp crypto investors & traders by becoming a Premium Member & gain an edge in the markets. For just $149/month, you can access our full suite of offerings:
Gain access to Deep Dives, Blueprints, Perspectives, Theses, Benchmarks & Outlooks.
Weekly market update reports and key actionable insights, keeping you informed as the market evolves.
Full access to historical research archive, including hundreds of long-form reports.