Lido V3 — Design & Implementation Proposal

Description

TL;DR

• Lido V3 is a major upgrade to the Lido protocol. The first production-ready V3 build has run through two public testnets and is undergoing audits. Final testnet validation and any audit-driven fixes would precede mainnet release.
• Introduces staking vaults (“stVaults”). V3 adds non‑custodial, over‑collateralized stVaults that let stakers opt into specific operators/strategies while still minting stETH. The existing 1:1 staking path remains available as the Core Pool (the V2 core path), so users who prefer the current experience can continue to stake through the protocol’s core staking contracts and established access points.
• Evolves the Lido protocol into staking infrastructure. By decoupling validator selection from Lido’s liquidity layer, V3 turns Lido protocol into a flexible platform supporting operator‑specific vaults, DVT clusters, institutional/parameterized vaults, and other integrations—aimed at improving validator diversity and meeting use cases a single path cannot fully support.
• Phased rollout with risk controls. stETH minting via stVaults is introduced gradually in three phases with caps and oversight. Phase 1 (initial) targets ~3% of Lido TVL (~300k stETH) across all stVaults and an allowlist of early‑adopter Node Operators (indicative per‑operator target ~50k stETH). Phase 2 (after a ~30‑day stable pilot) targets ~30% of TVL (~3M stETH) with broader participation. Phase 3 enables permissionless vaults within DAO‑defined risk parameters. Safety mechanisms (reserve requirements, rate limits, pause authority, etc.) are designed to mitigate slashing and operational risks. Important: Phase caps apply only to stETH minting via stVaults. Staking ETH is not limited in any phase; when minting is closed or a cap is reached, vaults may continue to accept deposits and stake ETH without minting stETH (i.e., without stETH liquidity).
• Vote outcome and next steps. This Snapshot asks whether to adopt the full Lido V3 upgrade. A YES signal means contributors would finalize testing/audits and then present an on‑chain vote to execute the upgrade on Ethereum mainnet. A NO signal means remaining on the current (V2 version line) protocol and not proceeding with the V3 rollout at this time.

Motivation

Lido V3 addresses the trade‑off between user choice and shared liquidity. Under V2, stakers have limited ability to select operators or use advanced configurations (e.g., DVT, sidecars, custom terms). V3 separates validator selection from the core liquidity layer, expanding stETH’s addressable market while supporting greater validator diversity and resilience. This aligns with the DAO’s previously signaled direction (see GOOSE‑2) to evolve from “a single path” to a platform others can build on a diverse product line. The design includes vault isolation and opt‑out mechanisms intended to reduce cross‑impact between vault users and other stETH holders under the stVaults risk assessment framework.

Lido V3 Overview (Core staking path + stVaults)

In V3, stakers have two paths:

• Core Pool (core staking path): The existing V2 mechanism remains available—submit ETH and mint an equal amount of stETH, with stake distributed across a diverse validator set via the protocol’s staking contracts (StakingRouter and attached Staking Modules: Curated, SimpleDVT, and Community Staking Module currently).
• stVaults (opt‑in): A new path where each vault delegates to a specific operator or strategy under configurable terms (e.g., fee splits, sidecars, infrastructure location, MEV/insurance arrangements). When stETH liquidity is accessed, vault deposits are over‑collateralized: a portion of ETH (e.g., 10%) is held as reserve, so users mint slightly less stETH than deposited ETH; the reserve is designed to buffer penalties. The same stETH token is used across both paths (via Core Pool or vaults). From the user’s perspective, they receive stETH that accrues network staking rewards (variable, not guaranteed) while optionally opting into a specific operator or configuration.

This architecture enables new compositions (operator‑specific vaults, DVT clusters, institutional vaults, integrations), without fragmenting stETH liquidity.

More details can be found in:

• LIP-31: Expanding the stETH liquidity layer with over-collateralized minting — Introduces an over-collateralized accounting system, enabling stETH to be backed by ether outside the Lido Core pool. Defines the VaultHub registry, external share mint/burn mechanics, and reserve requirements.
• LIP-32: Sanity checks for stVaults — Describes comprehensive sanity checks, including quarantine periods for suspicious value increases, using the “lazy oracle” mechanism.

Rollout Plan and Safety

What is capped vs. not capped

• Not capped: Staking ETH into stVaults (and through the Core Pool) is available in all phases.
• Capped/phased: stETH minting via stVaults (subject to global, per‑operator, and per‑vault limits defined by DAO governance).
• Implication: If minting is closed or a cap is reached, deposits into stVaults can still be staked, but do not mint stETH until minting is available (no stETH liquidity during that period). The Core Pool remains available and is not subject to the stVaults phase caps (it remains under the protocol’s separate issuance/rate‑limit mechanics).

Phase 1: Pilot. Global minting via stVaults is targeted at ~3% of Lido TVL (~300k stETH) across all vaults. An allowlist of early‑adopter Node Operators can create active minting vaults (indicative per‑operator target ~50k stETH). Other vaults may deploy and accept deposits, but cannot mint stETH until a subsequent phase opens minting for them.

Phase 2: Controlled expansion. After ~30 days of stable Phase 1 (no stVaults‑related incidents), the DAO may raise the global target cap to ~30% of TVL (~3M stETH) and broaden participation, subject to risk assessments and governance processes.

Phase 3: Permissionless mode. Within DAO‑defined risk parameters and global/per‑operator limits (e.g., per‑operator ceilings up to 1,000,000 stETH as initially envisaged), anyone could permissionlessly create vaults that both stake and mint stETH.

Across phases, risk mitigations include: a global external minting ratio, a daily issuance rate limit, per‑vault reserve ratios, and mint limits under the risk framework and pause authority (e.g., via GateSeal / contracts such as VaultHub and PredepositGuarantee as authorized by DAO governance. Vault owners can pause deposits and, subject to technical preconditions (e.g., no outstanding stETH minted and oracle clearance), may disconnect from VaultHub and discontinue Lido governance (ossify) for the chosen vaults, operating independently but without stETH minting.

Note: All caps/limits above are initial targets for the rollout and remain subject to on‑chain configuration and further DAO decisions.

Voting outcomes (what this vote means)

YES — Adopt Lido V3 (stVaults).

• Signal support to adopt the V3 design & implementation.
• Contributors would finalize testing/audits and present a separate on‑chain vote to execute the upgrade on Ethereum mainnet.
• If the on‑chain vote passes, rollout would begin with Phase 1 targets/caps and proceed as described, subject to DAO parameterization.

NO — Do not adopt Lido V3 at this time.

• Lido on Ethereum remains on the current (V2 version line) protocol.
• The V3 rollout described above would not proceed absent further proposals.

Out of scope for this vote: Setting specific fee schedules, per‑vault parameters beyond the high‑level caps described, appointments/mandates for the stVaults Committee, specific operator allowlists, or any other parameter changes not explicitly covered here. These items would be handled via separate governance or assigned committees’ proposals as needed.

Links & references

• Forum proposal
• Lido V3 Whitepaper
• V3 site & testnets
• Audit scope
• Technical design (stVaults)
• Risk assessment framework (stVaults)