Lido V3 stVaults: How Modular Staking Is Rebuilding Ethereum's $32 Billion Liquid Staking Leader
Lido controls more staked ETH than Coinbase, Binance, and Rocket Pool combined. With $32 billion in TVL and roughly $90 million in annualized revenue, it remains the single largest DeFi protocol on Ethereum.
But here is the uncomfortable truth: Lido is losing ground. Its market share has fallen from 32% in 2023 to under 25% in late 2025. The culprit is not a competing liquid staking protocol — it is the rise of restaking, leveraged staking, and yield-enhanced strategies that Lido's one-size-fits-all architecture could not accommodate. In 2023, only 2% of staked ETH was used in yield-enhancing strategies. By 2025, that figure hit 20%.
Lido V3 is the response. The stVaults upgrade, which went live on the Holesky testnet in mid-2025 with mainnet deployment targeted for late 2025, transforms Lido from a monolithic staking pool into a modular infrastructure platform. Institutional clients get bespoke validator setups. Node operators get isolated economic environments. DeFi builders get composable staking primitives. And stETH holders keep the liquidity they already depend on.
The question is whether modularity can recapture the growth that simplicity lost.
What stVaults Actually Are
The core innovation of Lido V3 is the decoupling of three functions that were previously bundled together: validator selection, liquidity provision, and reward distribution.
In Lido V1 and V2, all stakers deposited ETH into a single Core Pool. The protocol selected node operators, minted stETH at a 1:1 ratio, and distributed rewards uniformly. This worked brilliantly for retail users who wanted set-and-forget staking. It failed for anyone who needed customization.
stVaults change this by introducing modular staking primitives with three distinct roles:
Stakers deposit ETH into a vault and can choose to mint stETH against their staked position (or not). Each vault has an independent reserve ratio — a buffer ensuring the vault's staked position exceeds its minted stETH, protecting holders during slashing events.
Node Operators run validator infrastructure within dedicated vaults. They can configure client software, MEV policies (including relay selection), and sidecar integrations (like DVT or restaking). Each vault's validation setup is independent.
Curators govern risk parameters. They set reserve ratios, define validator eligibility criteria, and enforce policy rules. This is particularly important for institutional vaults where compliance requirements dictate which operators, jurisdictions, and configurations are acceptable.
The result is a marketplace. Instead of one staking pool with one configuration, Lido becomes a platform hosting many vaults with different risk-reward profiles — all sharing the same stETH liquidity layer.
The Fee Architecture
stVaults introduce a tiered fee structure that differs from Lido's traditional 10% flat fee:
- Infrastructure Fee (1%): Charged on expected staking rewards to fund protocol maintenance
- Liquidity Fee (6.5%): Charged on rewards generated from minted stETH — the premium for accessing Lido's liquid staking token
- Reservation Liquidity Fee (0%): Charged on mintable (but unminted) stETH — currently set to zero to incentivize vault growth
This structure creates an important economic dynamic. Stakers who do not need stETH liquidity pay only 1% — dramatically less than the current 10%. Those who mint stETH pay 7.5% total, still less than the legacy fee. The fee reduction is designed to attract large institutional stakers who previously chose solo staking or competing services to avoid Lido's fee overhead.
Who Is Building on stVaults
The partner ecosystem reveals where institutional demand is materializing.
P2P.org: Dedicated Institutional Vaults
P2P.org, one of the largest non-custodial staking providers, is launching two stVault product lines. Dedicated stVaults target institutional clients, DAOs, and family offices seeking direct staking exposure with predictable returns and clear validator attribution. DeFi Vaults introduce higher-yield strategies through collaborations with curators like Mellow, combining staking rewards with on-chain lending and other DeFi integrations.
The institutional product offers isolated exposure and validator-level transparency — features that pooled staking fundamentally cannot provide.
Northstake: ETF Infrastructure
Northstake, regulated under the Danish Financial Supervisory Authority, announced stVault integration specifically for ETF issuers. Its Staking Vault Manager (SVM) provides institutional-grade access with full operational control over vaults — including node operations, reporting, compliance monitoring, and liquidity execution.
This is particularly significant because VanEck has filed with the SEC to create a fund tracking spot stETH prices. If approved, the ETF would give traditional investors exposure to both Ethereum price appreciation and staking yield. Northstake's regulated infrastructure provides the compliance layer that ETF issuers require.
Everstake: Risk-Managed Yield
Everstake is deploying as one of the inaugural stVault operators, offering institutions a staking product combining higher yield potential with market-neutral risk controls. The architecture features Everstake operating validator infrastructure while a separate Risk Curator governs risk parameters and policy rules — a separation of concerns that mirrors traditional finance's distinction between asset management and risk oversight.
Additional Partners
The ecosystem includes Linea (bringing native staking yield to L2), Solstice Staking, Stakely, and integrations with Mellow Finance and Symbiotic for restaking capabilities.
The SEC Ruling That Changed Everything
On August 6, 2025, the U.S. SEC issued guidance confirming that tokens issued under liquid staking arrangements do not qualify as securities under federal law — provided they are structured without centralized profit promises.
This single ruling removed the largest obstacle to institutional stETH adoption in the United States. Before August 2025, U.S. institutions faced genuine legal risk holding stETH. The security classification question deterred compliance-conscious allocators who could not justify the regulatory uncertainty.
The ruling's impact was immediate:
- VanEck filed for a Lido-staked Ethereum ETF, proposing a fund that tracks spot stETH prices using MarketVector's LDO Staked Ethereum Benchmark Rate index
- Institutional demand for compliant staking wrappers accelerated, creating exactly the market that stVaults was designed to serve
- Reduced ETF approval timelines (from 240 days to 75 days under updated generic listing rules) made stETH-based financial products viable within months rather than years
The timing with Lido V3's development was not coincidental. Lido Labs had been designing stVaults with institutional compliance in mind, anticipating that regulatory clarity would eventually arrive.
GOOSE-3: The $60 Million Strategic Pivot
Lido's three foundation entities — Lido Labs Foundation, Lido Ecosystem Foundation, and Lido Alliance BORG — submitted GOOSE-3, a $60 million 2026 strategic plan that formalizes the protocol's transformation.
The budget breaks down into $43.8 million for basic expenditures and $16.2 million in discretionary spending for growth initiatives. The plan targets four strategic objectives:
- Expanding the staking ecosystem: One million ETH staked through stVaults by end of 2026
- Protocol resilience: Core protocol upgrades including V3 mainnet deployment
- New revenue streams: Lido Earn vaults and other yield products beyond vanilla staking
- Vertical scaling: Real-world commercial applications and institutional wrappers (ETPs, ETFs)
The one-million-ETH target is ambitious. At current prices, that represents roughly $3.3 billion in new TVL flowing specifically through stVaults — a figure that would represent meaningful growth even for a protocol already managing $32 billion.
Co-founder Vasiliy Shapovalov has been candid about the strategic necessity, citing "missed opportunities in restaking" as the catalyst for the modular pivot. The protocol watched as EigenLayer and others captured the yield-enhancement market that Lido's monolithic design could not address.
The Core Pool Is Not Going Away
A critical nuance: Lido V3 does not replace the existing staking experience. The Core Pool continues operating exactly as before — deposit ETH, receive stETH, done.
As of mid-2025, the Core Pool allocates stake across over 600 Node Operators spread across three active modules: the Curated Module, Simple DVT, and the Community Staking Module (CSM). For the vast majority of stakers who want simplicity and decentralization, nothing changes.
stVaults exist alongside the Core Pool as a new category of staking product. The initial rollout is conservative — a 3% TVL limit during the pilot phase, gradually expanding as the system proves itself. This cautious approach reflects lessons learned from DeFi protocols that scaled too aggressively and suffered security incidents.
The architecture ensures that stVaults and the Core Pool share the same stETH token. Whether ETH enters through a retail deposit or an institutional vault, the resulting stETH is fungible and carries the same liquidity across all of DeFi — over 300 protocol integrations and counting.
What This Means for Ethereum Staking
Lido V3 arrives at an inflection point for Ethereum staking infrastructure.
The institutional wave is coming. The SEC's non-security ruling, pending stETH ETFs, and banking regulators warming to digital asset custody create a regulatory environment where institutional staking is not just possible but attractive. stVaults provides the customizable infrastructure these institutions require.
Restaking integration is table stakes. By supporting sidecars and integrations with protocols like Symbiotic, stVaults can participate in the restaking economy that previously siphoned demand away from Lido. Validators can earn additional yield through restaking while maintaining their stETH position.
The modular thesis extends beyond staking. Just as modular blockchains (Celestia, EigenDA) disaggregated execution from consensus, stVaults disaggregates staking into composable components. This mirrors a broader trend in DeFi infrastructure toward specialization and composability.
Fee compression accelerates. The 1% infrastructure fee for non-stETH vaults dramatically undercuts Lido's own 10% legacy fee. This signals that staking margins will continue declining, pushing protocols to compete on infrastructure quality and ecosystem integration rather than pricing.
Whether Lido V3 successfully reverses the market share decline depends on execution. The technology is sound — modular vaults with shared liquidity are a genuinely better architecture for the diversity of staking use cases that now exist. The partner ecosystem is forming. The regulatory window is opening.
The question is speed. EigenLayer, Symbiotic, and emerging staking protocols are not standing still. Lido's advantage is its $32 billion in existing TVL and the network effects of stETH as DeFi's most integrated liquid staking token. V3 preserves that advantage while opening the door to markets that V1 and V2 could never serve.
For the first time since 2023, Lido has a credible path to growth beyond its core product. Whether the market share stabilizes or rebounds will be the definitive test of whether modularity can do for staking what it has already done for blockchains.
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