Lido begins moving $16.5 billion in staked ether to cut validator count by a third
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Lido, the largest staking pool on Ethereum, initiated its most significant upgrade since 2023 by consolidating more than 8 million staked ether (stETH), valued at approximately $16.5 billion, onto Ethereum’s new post-Pectra validator architecture. This upgrade follows the post-Pectra validator design introduced a year prior and aims to reduce Ethereum’s total validator count by about one-third. The consolidation is expected to lighten the load on the Ethereum consensus layer by cutting attestation messages by roughly 29% per epoch, thereby improving network performance without directly affecting gas fees or transaction speeds.
This migration shifts Lido’s curated node operators to a new system called Curated Module v2 (CMv2), marking the first time that all 34 existing operators will be required to post locked ETH bonds. This bond requirement introduces economic accountability by financially penalizing non-performance, complementing the previous reliance on reputation and track record alone. Lido’s chief of staking, Isidoros Passadis, described this as the biggest operational change since Lido’s V2 upgrade and highlighted that, by backing their performance with capital, the set of validators securing Lido’s staked ETH becomes leaner and better secured.
Despite concerns that enforcing bonded capital might drive away established node operators, Lido confirmed that all 34 curated operators are expected to transition to CMv2 without departures due to the bond obligation. According to Will Shannon, Lido’s head of node operator mechanisms, the bond system adds real economic accountability while preserving the existing model based on reputation. The transition will utilize a separate consensus-layer consolidation queue instead of Ethereum’s standard deposit and activation queue.
Lido estimates that this upgrade will result in a modest reduction of about 0.28% in annual staking rewards across its protocol due to the shrinkage in the validator set. Validators will continue to earn rewards until they exit, and any missed rewards will be limited to the period before validators’ balances reach the new consolidated state. Overall, the upgrade is positioned as a significant enhancement to Ethereum’s network efficiency and staking security orchestrated by Lido.