Lido Approves Snapshot For CSM V2 To Enhance Decentralization, Introduce Identified Community Stakers, And Optimize Rewards
In Brief
Lido’s CSM V2 has been approved, introducing new features like Identified Community Stakers, improved rewards, lower entry barriers, and enhanced decentralization.
Ethereum-based liquid staking protocol Lido has announced that the Snapshot vote for Community Staking Module Version 2 (CSM V2) has successfully passed. The introduction of CSM V2 marks an important update to the protocol, intended to enhance the involvement of community stakers, maintain competitive reward structures within the system, and expand the Community Staking Module’s proportion of the total Lido stake to a double-digit percentage.
The CSM V2 upgrade introduces several key enhancements, including the implementation of Identified Community Stakers (ICS), a refined reward structure that accounts for differentiated staking contributions, improvements in the accuracy of performance oracle predictions, mechanisms to address systematic underperformance, and compatibility with EIP-7002 to ensure broader protocol support.
One of the primary features of the update is the introduction of ICS, a distinct category of node operators that differs from general permissionless participants by offering exclusive advantages, thereby making participation in the CSM more rewarding and accessible for likely independent community stakers. ICS receive several benefits compared to permissionless node operators, including priority access to the deposit queue, which allows them to bypass competition with general permissionless participants. They also benefit from higher rewards, with boosts of up to 2.36 times, and are required to post a lower bond—1.5 ETH for the first validator instead of 2.4 ETH. Additionally, ICS enjoy a broader acceptable performance threshold for validators.
Lido protocol contributors are in the process of preparing a proposal to implement an Independent Community Staker identification mechanism. This mechanism aims to encourage genuine community participation while reducing the potential for exploitation by larger node operators. Community feedback will play an important role in shaping this proposal once it is released.
Despite these new features, CSM version 2 remains fully permissionless for general node operators, who continue to operate under the existing conditions. These include a bond requirement of 2.4 ETH for the first validator and 1.3 ETH for subsequent ones, a 3.5% reward share for node operators, and competitive rewards relative to the broader market, with boosts reaching up to 1.76 times.
In order to differentiate between various node operator types, CSM version 2 introduces a system called Entry Gates. These Entry Gates create customized pathways for node operators entering the Community Staking Module, enabling features tailored to the specific type of operator. These features include adjustable reward shares, deposit priority, distinct performance thresholds, and security-related settings.
What Is CSM V2?
Lido’s CSM V2 represents an advancement of the Lido protocol’s permissionless staking framework on Ethereum, designed to promote greater decentralization by facilitating increased involvement from independent node operators. The update lowers the entry barriers by reducing the bond requirement to 2.4 ETH for the initial validator, with an even lower bond of 1.5 ETH available for early participants, and 1.3 ETH for additional validators, which is more accessible compared to the standard 32 ETH minimum.
The module now operates on a fully permissionless basis, enabling any user to become a node operator without needing prior authorization. To further enhance decentralization, previous limits restricting node operators to 12 validators have been removed, and the module’s capacity has been expanded to accommodate up to 2% of Lido’s total staked assets, fostering a wider distribution of validators. Additionally, CSM V2 incorporates upgraded monitoring capabilities alongside a revised fee structure aimed at improving operational efficiency and maximizing rewards for all participants.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in cryptocurrency, zero-knowledge proofs, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
