Lido, a liquid staking protocol that lets users earn Ethereum staking rewards through its stETH token, has launched an upgrade to its staking infrastructure that it says is designed to improve validator efficiency and decentralization.

The upgrade introduces Curated Module v2, which adds support for Ethereum’s 0x02 withdrawal credentials. According to a Lido update on Monday, the change allows validators to increase their effective balance from 32 ETH to as much as 2,048 ETH.

Lido said the migration could reduce Ethereum’s validator count to about 628,000 from 880,000, a decline of roughly one-third. The migration has not begun, and the figures are based on Lido’s projections.

The company said the change is intended to reduce the load on Ethereum’s consensus layer by cutting the number of validators and validator messages needed to maintain the network. It is not meant to alter execution-layer activity, which determines transaction fees and gas costs.

The update also introduces new accountability measures for Lido’s node operators, including bonding and penalty mechanisms. Lido said future stake distribution could place greater weight on factors such as operator performance, fees, and contributions to Ethereum’s ecosystem.

“Curated Module v2 is the next major step in that evolution,” Lido said, adding that the upgrade brings new operator incentives, bond-based security mechanisms, and governance improvements. The changes also reflect a broader focus across Ethereum staking on balancing scale with operational resilience, since validator growth can affect the amount of network coordination required even when underlying user activity is unchanged.

Lido said stakers do not need to take any action because the upgrade will be handled at the protocol level.

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