CSM v2 Final Rollout

Description

TL;DR

Community Staking Module (CSM) v2 is a major Lido on Ethereum protocol’s Community Staking Module upgrade that enhances the module’s security, efficiency, and decentralization.

This proposal seeks Lido DAO approval for the final rollout of CSM v2, including the release plan, finalized key parameters, Community Stakers’ Identification Framework, an adjustment of the stakeShareLimit, and operational funding for the CSM Committee to process reimbursements.

This proposal builds on the prior DAO approval of the module’s architecture and design.

If this proposal is supported, the next step will be the on-chain vote to upgrade CSM to version 2, along with the coordinated rollout of accompanying measures outlined in this proposal.

CSM v2 Deployment Overview

Community Staking Module (CSM) v2 is an evolutionary step in the CSM development, which adds support for EIP-7002, enabling more secure and flexible validator withdrawals, includes an improved Performance Oracle for more accurate validator performance tracking, and introduces distinct Node Operator types to support a more structured and scalable operator model.

The detailed CSM v2 release plan description is posted on the Lido Research Forum including the latest version of the timeline. The main points for consideration are outlined below.

Parameters for Node Operator types

Upon release, CSM v2 will feature the following three Node Operator Types: Permissionless, Legacy EA (Early Adopters), and Identified Community Stakers (ICS).

The actual values for the NO type parameters are available on IPFS, and a detailed description and motivation are provided in the corresponding post on Lido Research Forum.

Note. The "Legacy EA" NO type is introduced to ensure a smooth migration from the current CSM v1 Node Operator structure. All existing CSM EA Node Operators will be automatically classified under this new type. This NO type will share all parameters with the "Permissionless" Node Operator type, except the bond curve, which will be the same as for the "ICS" Node Operator type.

Community Stakers Identification Framework

The Community Stakers Identification Framework is introduced to enhance the decentralization of both CSM and the Lido protocol by providing a clear pathway for community stakers to join CSM and receive beneficial conditions. The core idea of the identification framework is to assess verified applications from users.

Verification is performed by requiring applicants to confirm ownership of the submitted addresses by signing a message and publishing it.

The evaluation is based on three categories of proofs: Proof-of-Experience, Proof-of-Engagement, and Proof-of-Humanity. The list of assessment sources for each category with the corresponding scores is published on the Lido Research Forum (alongside a detailed description of the framework). If the addresses and additional information provided in the application result in a sufficient score in each category, the primary address from the application will be included in the next amendment batch for the ICS list.

Updates to the ICS list are proposed to be performed via a dedicated Easy Track motion type. As part of a recurring process for each update, CSM Committee members verify the amendment batch, prepare an updated version of the ICS list, and start an Easy Track motion to apply the update.

To reduce the time and effort required, the initial ICS list is proposed to be formed from the existing CSM EA Node Operators that pass a simplified assessment described in the corresponding post. Voters can find the proposed initial ICS list on IPFS and in the post on the Lido Research Forum.

If approved, this framework will be used by Lido contributors and CSM Committee members to identify independent community stakers and allow them to join CSM with the "ICS" NO type. Existing CSM operators will also be able to get qualified as identified community stakers and upgrade their NO type to the "ICS". Future maintenance of the framework, including source addition and removal, scores adjustment, updates, and pausing, is proposed to be managed by the CSM Committee.

CSM stakeShareLimit increase

To enable a meaningful usage of the great features of CSM v2 and increase decentralization of the Lido protocol, a phased increase of the CSM stakeShareLimit is proposed:

• Increase CSM stakeShareLimit to 5% alongside CSM v2 release;
• Following stake distribution and performance analysis, increase CSM stakeShareLimit to 10% by late 2025 or early 2026.

A detailed motivation and supporting considerations for the proposed increase schedule are provided in the corresponding post.

Audits

CSM v2 on-chain code is currently undergoing 3 security audits by Ackee, Statemind, and Code4rena to ensure code security and robustness. The required condition for the CSM v2 mainnet release is at least 2 finalized reports with no unresolved findings.

Budget allocation for MEV-stealing-related reimbursements

CSM includes a mechanism that allows for the burning of bonded funds in cases of operator misbehavior or non-performance. However, there may be edge cases where an initial assessment triggers a penalty, but a more thorough post-incident review reveals that the Node Operator acted correctly and in accordance with Lido protocol guidelines.

To account for such situations, it is proposed that the CSM Committee be granted the discretion to compensate affected operators using a dedicated budget if it is determined that the penalty application was unjustified. The compensation fund is proposed to be initially supplied with 10 stETH from the Gas Supply Committee, specifically allocated to cover slashed Node Operators’ bonds under CSM. Should this budget be depleted, any additional funding would be requested from the Lido DAO.

Next Steps

If the Lido DAO supports the proposed changes, Lido contributors will:

• Initiate an on-chain vote to upgrade CSM to version 2 on the Ethereum mainnet, following the completion of at least two security audits with no unresolved findings;
• Use the approved parameters for Node Operator types and the initial ICS list during the CSM v2 deployment;
• Apply the approved Community Stakers Identification Framework to assess user applications and add eligible applicants to the ICS list in CSM v2, and continue using the framework for future list adjustments;
• Grant the CSM Committee the right to maintain and adjust the Community Stakers Identification Framework;
• Include the necessary steps to increase the stakeShareLimit to 5% in one of the upcoming on-chain votes;
• Perform stake distribution and performance analysis of CSM v2 in Q3-Q4 2025, and, based on the results, move forward with proposing a stakeShareLimit increase to 10% via an upcoming on-chain vote;
• Allocate the 10 stETH MEV-stealing-related compensation budget from the Gas Supply Committee to the CSM Committee multisig.