Lido, the leader in liquid staking on Ethereum, is taking another step forward with the arrival of Lido V3. This major update introduces stVaults, an innovation that promises to transform the user experience by giving them more flexibility and control over their staked assets. Until now, staking via Lido has been based on a single, shared model, limiting the scope for customisation. With stVaults, institutions, asset managers and node operators can now tailor their strategies to their specific needs. A breakthrough that aims not only to attract new players, but also to strengthen the diversification and decentralisation of the Ethereum network.

‍The big news: stVaults will bring customisation

Lido V3 marks a major evolution for liquid staking on Ethereum by bringing more flexibility and control to users. Until now, staking via Lido was based on a single delegation model where deposited ETH were pooled and entrusted to a set of validators selected by the protocol. This model offered little customisation and did not allow the validators to be chosen or the reward distribution rules to be adapted. In addition, this model contributed to a certain centralisation of staking, an increasingly critical issue for Ethereum.

With this new version, Lido introduces stVaults, a key innovation that transforms the way staking is organised. These "Staking Vaults" are modular smart contracts that allow users to personalise their experience according to their objectives and risk profile. In practical terms, stVaults offer the possibility of adopting different staking strategies, making them particularly interesting for institutions, asset managers and node operators.

For example, stVaults allow institutions to configure their own staking environment by selecting their validators and defining specific reward distribution rules. This ensures better compliance with regulatory requirements and greater control over the flow of deposits and withdrawals. At the same time, these new tools open the door to advanced strategies, such as leveraged staking, where users can optimise their returns by combining staking and DeFi tools. Another notable innovation is the ability to opt for restaking, which allows users to reinvest their rewards while limiting socialised risk within the stETH ecosystem.

By making staking more modular and customisable, Lido V3 aims to attract new players, particularly financial institutions, while contributing to the diversification and decentralisation of the Ethereum network. With a greater number of independent validators, staking becomes less concentrated, thereby strengthening network security. In addition, this development encourages the emergence of new performance and optimisation strategies for DeFi users.

The testnet for this release is scheduled for the spring, after the Ethereum Pectra update, with deployment on the main network this summer. This update marks a significant step forward for Lido and Ethereum, making liquid staking more flexible, accessible and scalable for everyone from individual users to large institutional players.

>> Read also: fundamental analysis of EigenLayer, champion of restaking

Lido's weight in Ethereum staking

Lido remains the largest liquid staking protocol, clearly dominating the market. As of 14 February 2025, it accounted for more than 27% of all ETH staked, a considerable market share.

The dominance of the Lido protocol raises a problem in terms of decentralisation. Its market share, although declining in recent months, reached almost 33% of ETH staked a year ago, raising concerns about its influence on the network.

The volume of ETH staked via Lido grew steadily from its launch until March 2024. However, for almost a year, this growth has stagnated, without however compromising its status as the undisputed leader in liquid ETH staking.

>> Read also: fundamental analysis of Lido and its LDO token

Still no use for the LDO token

With the arrival of Lido V3, one question inevitably comes up: does this update bring any new use for the LDO token? The straightforward answer is no.

Since its inception, LDO has been primarily a governance token, enabling its holders to vote on key protocol decisions. But at a time when many Web3 communities are calling for greater utility for their tokens, the issue of fee switch - a mechanism that would allow part of the protocol's revenue to be redistributed to LDO holders - remains a sensitive subject and one that is largely sidestepped by the main players in the sector.

However, the idea of increasing LDO's utility has been discussed, notably in November 2024, when a debate emerged on the desirability of paying dividends to holders. In the end, however, these discussions did not lead to any concrete changes. This lack of change could frustrate an increasingly demanding community, while other protocols are exploring models where their tokens play a more direct economic role.

A feasibility study was mentioned in these discussions, aimed at assessing the viability of such a mechanism within the Lido framework. But for the moment, there is no indication that this avenue will lead to a swift decision. It is interesting to note that Uniswap, another DeFi giant, has still not activated its own fee switch, despite recurring debates on the subject.

The question remains: do the dominant protocols really have an interest in changing their business model when their position seems secure? As long as the status quo doesn't undermine their adoption, pressure for change could well go unheeded.

Lido's business model

Lido's business model is extremely simple: the protocol levies a 10% fee on staking rewards, split between node operators and the Lido DAO treasury.

Example:

• A user stakes 100 ETH via Lido.
• These ETH generate 4 ETH in rewards per year (assumption: 4% APY).
• Lido collects 0.4 ETH (i.e. 10% of the 4 ETH earned).

As DeFi Llama's chart illustrates, Lido has generated cumulative revenue of $223 million from launch to 16 February 2025.

This amount should be put into perspective, as according to Hasu, Lido's strategic advisor, the protocol would still not be profitable despite these revenues.

Inspecting the data collected by Steakhouse Financial on Dune, we can see that its net profit from the protocol is still extremely meagre.