Q4 is going to be full of important DeFi upgrades. That includes @LidoFinance's Lido V3. It will turn Lido from a single pool into a modular staking infrastructure. This is everything you should know about Lido V3. 🧠⤵️

2/ TL;DR: What changes in Lido V3 ► Introduces staking vaults (stVaults): over-collateralized, non-custodial vaults for customizable staking ► Keeps the existing 1:1 Core Pool ► Adds built-in risk controls ► New use cases for institutions, nodes, and apps

3/ First, why Lido V3? Under V2, all staked ETH flows to a single liquidity pool managed by the StakingRouter. This unifies stETH but limits flexibility: stakers can’t choose operators, apply custom setups (like DVT, sidecars, or insurance), or comply with institutional policies. V3 fixes this trade-off by separating validator selection from Lido’s liquidity layer, enabling more staking strategies without fragmenting stETH.

4/ Lido V3 introduces 2 coexisting paths to mint stETH: 1️⃣ Core Pool (unchanged): → Deposit ETH to mint 1:1 stETH → Stake distributed automatically across modules (Curated, SimpleDVT, Community Staking Module). 2️⃣ stVaults (new in V3) → Each vault delegates to a specific operator or configuration → Users deposit ETH and optionally mint slightly less stETH than deposited ETH → The reserve is locked as over-collateralization as a buffer

5/ What's in stVault? Each stVault is an independent contract linked with a node operator or strategy. Vault owners can: - Choose node operators - Custom fee structure - Choose optional sidecars (e.g. @Obol_Collective or @ssv_network) - Choose MEV providers - Deploy with modular infras and composability

6/ stVaults plug into VaultHub, the new registry and safety layer controlling minting rights, reserves, and risk parameters. VaultHub enforces over-collateralization and connects vaults to the StakingRouter, which handles validator deposits and rewards accounting.

7/ How does over-collateralized minting work? When ETH is staked through a vault: - A portion of ETH locked as Reserve Ratio (RR) - The rest backs minted stETH, representing the vault’s staked position If a vault’s health deteriorates (due to slashing or oracle updates), a Forced Rebalance Threshold (FRT) triggers to keep the system's solvency. → part of the vault’s collateral is shifted back to the Core Pool → minted stETH is reduced, restoring over-collateralization Users can suffer reduced leverage or yield, but vaults stay safe.

8/ Lido V3 introduces a layered risk management framework: - Reserve Ratio (RR) sets how much extra ETH must be locked per minted stETH (eg. 10-30%, configurable per operator). - Force Rebalance (FRT) automatically unwinds a vault’s liability if RR falls below the threshold. - Sanity Checks & LazyOracle monitors abnormal value changes. Suspicious vaults enter quarantine until verified. - Obligations unfulfilled DAO fees or redemption duties suspend minting/withdrawals until resolved. - Pause Authority (GateSeal) DAO-level emergency control to halt external minting. - Ossification: vault owners can disconnect from VaultHub once all liabilities are cleared, operating fully independent but without stETH minting.

9/ How are fees earned? Node Operator Fee: taken from actual staking rewards earned by the vault’s validators. Other fees that are paid to DAO: - Infrastructure Fee: based on deemed rewards - Liquidity Fee: accrues on minted stETH

10/ Roadmap Phase 1: Pilot - Global minting cap: ~3% of TVL (~300k stETH) - Allowlist of early-adopter Node Operators (~50k stETH each) - Other vaults can stake but can’t mint stETH yet Phase 2: Controlled expansion - Global cap: ~30% TVL (~3M stETH) - Broader operator participation after risk reviews Phase 3: Permissionless mode - Minting cap: ~30% TVL (~3M stETH) - Open permissionless vaults with risk parameters defined by DAO

12/ The final testnet launched. Mainnet launch will be in November. @ChorusOne and @Solsticefi are the first to launch with Lido V3. More DeFi protocols, staking providers, and risk-aware ETF issuers will come. With $LDO buybacks ahead, Q4 will be huge for Lido💧