Lido Upgrade Could Slash Ethereum Validators by One-Third

Lido, a liquid staking protocol for Ethereum's stETH token, has launched an upgrade to its staking infrastructure. The update introduces Curated Module v2, which allows validators to increase their effective balance from 32 ETH to up to 2,048 ETH. This change is expected to reduce the number of Ethereum validators by one-third, from about 880,000 to roughly 628,000.

The upgrade also introduces new accountability measures for Lido's node operators, including bonding and penalty mechanisms. These measures aim to improve operator performance, fees, and contributions to the Ethereum ecosystem.

Lido emphasized that no action is required from stakers because the upgrade will be handled at the protocol level. The change is expected to affect Ethereum's consensus layer by reducing the number of validators and validator messages required to maintain the network.