SSV Lido Module Proposal

Description

Clusterform, an independent SSV Labs subsidiary company, proposes integrating a new module into the Lido protocol Staking Router, known as the SSV Lido Module (SSVLM).

Following a discussion of the SSVLM proposal on the Lido Research forum, the advancement of the proposed module is now up for a signalling Snapshot vote for the Lido DAO.

What does approval mean?

Approval of the snapshot means approval of the following items:

• Lido Contributors will technically coordinate with Clusterform to guide their development of the module
• High level design of SSVLM as stated in the Research Forum Post
• Coordination of a testnet run using the Lido testnet infrastructure in Q2 and Q3 2025
• Further research and development of SSVLM.

If the vote is supported, initial deployment on a testnet is targeted for Q2 2025. This would be followed by a review of the testnet run results and codebase audit.

If the outcomes are successful, Lido token holders will have the opportunity to express their opinion in another Snapshot vote, which will include the technical details and parameters, followed by a final on-chain vote aiming to integrate the module into the Lido on Ethereum protocol throughout H2 2025.

Below is a short summary of the SSVLM proposal. Lido DAO voters are encouraged to read the full proposal on the Research Forum before voting.

Introduction

The SSV Lido Module (SSVLM) is a permissionless staking module leveraging the open source nature of SSV Network’s Distributed Validator Technology (DVT) to integrate Node Operators (NOs) into the operator set of Lido on Ethereum.

Building on the CSM framework and incorporating insights from the SimpleDVT module, SSVLM is designed to support operations of Node Operators within DV clusters while enhancing the scalability, security, and decentralization of Lido’s staking ecosystem.

SSVLM Benefits

For Node Operators

The SSVLM provides NOs with a permissionless pathway to join the Lido on the Ethereum operator set and operate validators as part of DV clusters. Within these clusters, NOs benefit from reduced barriers to entry, as they are only required to provide a fractional bond per validator, lowering the upfront requirements for participation.

Operating within DV clusters also provides NOs with a more resilient participation model. The inherent fault tolerance of DV clusters supports uninterrupted validator operations even if an individual NO experiences downtime, significantly reducing risks such as slashing and underperformance.

The SSVLM simplifies the user experience for NOs and aims to reduce operational costs by abstracting away the complexities of managing DV clusters from NOs. Responsibilities such as key management, cluster coordination, and other coordination activities are seamlessly managed within the module, streamlining operations and eliminating costs NOs would otherwise incur, such as SSV network fees and transaction costs.

By removing these complexities, the SSVLM allows NOs to focus solely on maintaining their infrastructure and bond, without incurring additional overhead or expenses. This streamlined approach makes participation both efficient and cost-effective, positioning the SSVLM as an attractive solution for NOs.

For the Lido on Ethereum protocol

The SSVLM provides the Lido on Ethereum protocol with a scalable and decentralized way to expand its operator set. Unlike solo-operated validators, each validator in the SSVLM is managed by multiple NOs within DV clusters. This structure should allow a larger and more diverse set of operators to be onboarded into the Lido on Ethereum protocol, effectively distributing stake across multiple participants and enhancing decentralization.

DVT reduces the trust requirements placed on operators by enabling them to manage only partial key shares rather than full validator keys, with keys securely generated using Distributed Key Generation. This approach eliminates the need for operators to have custody of the validator keys, significantly reducing risks associated with key management and increasing protocol security.

Additionally, the use of DV clusters introduces diverse operator configurations, ensuring that even if one NO in a cluster goes offline, the others continue to maintain validator operations. This inherent fault tolerance creates a more resilient staking infrastructure, reducing the impact of individual NO failures and enhancing the protocol’s overall stability.

While the Simple DVT Module has demonstrated the efficacy of utilizing DVT on the mainnet, the manual coordination required to assess participants, form clusters, and facilitate onboarding is not scalable for onboarding thousands of Node Operators.

As a long-term solution, the SSVLM offers the Lido on Ethereum protocol a scalable, permissionless alternative to the existing SimpleDVT module. Its design enables seamless and decentralized operator participation, making the SSVLM a foundational component of the evolving staking ecosystem around the Lido protocol.

SSVLM Design

The SSVLM is designed as a permissionless staking module enabling any Node Operator to join the Lido on Ethereum protocol. In DVT settings, operating validators within distributed clusters presents additional complexities, especially regarding secure key generation, layered coordination, and effective cluster management at scale.

• Permissionless - Any NO that provides the required bond and is registered on the SSV Network can join the module. Additionally, incentives for Verified Operators are expected to allow for greater transparency into the make up of participating operators.
• Node Operator Experience - Key management, cluster coordination and management requirements are fully abstracted away from NOs. This allows operators to focus exclusively on maintaining their infrastructure and providing a bond, without the burden of additional operational overhead through simplified operations.
• Lower Costs - By abstracting operational complexities, Node Operator costs that would otherwise be incurred, such as SSV network fees and transaction costs, are entirely eliminated, as these expenses are fully managed by a network of distributed Module Oracles. This approach reduces barriers and ensures a more accessible and cost-effective participation model for NOs.
• Zero Coordination & Scalable - NOs can join and operate validators within DV clusters independently, without any need to coordinate with other NOs.
• Enhanced Security with DKG - Module’s validator keys are generated through Distributed Key Generation (DKG), eliminating the reliance on any single operator to manage keys individually.
• Competitiveness - Operating within DV Clusters allows each NO to provide only a fraction of the total bond per validator, lowering entry barriers and broadening access for operators.

Module Architecture

Smart Contracts

The SSVLM comprises a set of smart contracts, primarily structured around two key components:

• SSVLM Adapter This smart contract manages the integration with the Lido protocol by implementing a Staking Router-compatible interface. It holds a registry of all the module's validators, mapping them to their respective clusters, states, and deposit data. Additionally, it transfers staking rewards from the module to the SSVLM Core smart contract, where they are further distributed to its Node Operators.
• SSVLM Core The user-facing smart contract, serving as the main gateway for NOs and Module Oracles, this smart contract oversees NO onboarding, bond management, DV clusters management and rewards distribution. The smart contract is maintained by "Module Oracles", which are in charge of its upkeep and continued operations.

Envisioned Terms

1. Clusterform team shall retain all rights and interests, including intellectual property rights, in any proprietary modifications, enhancements, and integrations made as part of the services and deliverables provided under this Proposal. Any underlying open-source code remains subject to its respective open-source license.
2. Clusterform may provide some of its obligations through affiliate entities or third parties, in its sole discretion.
3. Services shall be provided on an “as-is” basis. The module is based on an available-to-all open-source code determining the services, as may be amended by the Clusterform team from time to time. Clusterform disclaims all warranties, express or implied, with respect to the services or deliverables. Unless in cases of wilful misconduct and fraud, Clusterform shall not be responsible for claims, damages, liabilities, losses, expenses and costs, direct or indirect, arising out of or resulting from this engagement, services, and deliverables, whether civil, administrative, criminal or otherwise. Nonetheless, excluding wilful misconduct and fraud, if a competent court or authority determines otherwise, liability will be limited to 50.000 USD for all claims.
4. Clusterform shall perform its obligations independently. Nothing shall be viewed as establishing partnership, agency, employment or exclusivity relationship between Clusterform, Lido DAO, Lido DAO contributors, LDO token holders and/or any Lido DAO adjacent entity. Clusterform may make similar proposals in other projects or otherwise pursue similar endeavors to this Proposal. It is clarified and understood that this proposal does not create engagements between users of Lido protocol and Clusterform.
5. Clusterform may stop supporting the services and deliverables in this proposal by giving a 3 (three) months notice, that will be published to the Lido DAO Research Forum, unless instructed to do so earlier by a competent authority.
6. The Clusterform team will make commercially reasonable efforts to maintain compatibility with the Lido protocol, but is not obligated to do so.
7. The Clusterform team is committed to endeavoring to provide industry standard quality regarding the components of this module.