Lido Initiates Transfer of $16.5 Billion in Staked Ether to Reduce Validator Count

Lido is streamlining its validator network by consolidating 8 million staked ETH.

Lido has launched a major upgrade aimed at consolidating over 8 million staked ether (stETH), valued at approximately $16.5 billion, into Ethereum's updated validator framework. This move is expected to reduce the number of validators on the Ethereum network by about one-third.

The upgrade, described as the most significant since Lido V2's introduction in 2023, is designed to alleviate pressure on the Ethereum consensus layer. While it won't directly lower gas fees or increase transaction speeds, it should enhance overall network efficiency by cutting down attestation messages by roughly 29% per epoch.

As part of this transition, Lido's professional node operators will migrate to Curated Module v2 (CMv2). For the first time in Lido's history, these operators will be required to secure their operations with locked ETH bonds, introducing a layer of financial accountability to the existing reputation-based system.

Isidoros Passadis, chief of staking at Lido Labs Foundation, emphasized that this update will streamline Lido's validator set while ensuring that operators back their stake with their own capital. Despite initial concerns about whether the bond requirement would deter current operators, Lido confirmed that all 34 operators plan to adopt the new module.

Will Shannon, head of node operator mechanisms at Lido Labs Foundation, noted that this change enhances the accountability framework without completely replacing the existing reputation model. The migration will also feature a dedicated consensus-layer consolidation queue, separate from Ethereum’s regular deposit and activation queue.

Lido anticipates that this shift will slightly reduce annual staking rewards by about 0.28%, but validators will continue to earn rewards until they transition to the new validators.