Lido DAO

The Lido Community Staking team is seeking signal approval of the Community Staking Module (CSM) design from the Lido DAO. The module will allow permissionless entry to the Lido on Ethereum validator set with a bond requirement.

Lido on Ethereum currently has a curated set of node operators; at the current stage DAO has approved Simple DVT module signal proposal, which is planned to launch in Q1 2024. And the next step towards decentralization is CSM!

In case of approval, the Community Staking team will carry out further research and development of the module proposed, and the mainnet release, along with all the parameters, would be proposed for the Lido DAO approval in the on-chain vote for the upgrade closer to the end of 2024.

High-level design

High-level design is described in detail in the Community staking landscape and discussed on the Lido research forum.

Key points of high-level design are:

1. Permissionless entry with bond
2. Only ETH (stETH) as a bond token
3. “Non-linear” bond scaling for Node Operators
4. First in, first out stake allocation queue
5. Performance oracle with performance threshold approach for solo staker friendly rewards distribution

Whereas the high-level design of the module is developed, several things must be researched and finalized before the module implementation. Namely:

• Actual bond size and possible bond reduction schemes
• Lido on Ethereum core protocol upgrades required for CSM
• Particular parameters for the mainnet launch

Stake allocation strategy

As a part of the design of the module, it’s also important to consider the module’s position in the overall landscape of the Staking Router. As the module is meant to both (a) allow for node operators to permissionlessly use the protocol, as well as (b) encourage such usage by community stakers (solo stakers and smaller organizations who are staking in a non-professional capacity), it is suggested that the DAO approve the below module stake threshold rationale (which it can later revise should it wish):

• At launch and for a period no longer than 12 months, the module shall not exceed a 1% stake allocation threshold until module robustness is considered sufficient by the DAO;
• If the module reaches capacity before the 12-month mark and is assessed by the DAO to be robust and secure, the DAO shall consider a proposal to increase the module’s threshold from 1% to 2%;
• Further, if the module continues to perform well and there is demand from node operators for its use, the DAO shall consider gradually increasing the stake threshold, up to a maximum of 10% of total ETH staked with the Lido protocol.

Partnerships

As outlined in the research forum post, in case of approval, the Community Staking team will look for LEGO support to provide grants for the ecosystem partners to develop integrations and supplementary tools for CSM. The main focus will be on hardware and tooling to help stakers run validators, primary at home. Multiple teams, namely DAppNode, Nimbus, eBunker, Sedge, Ethereum on ARM, and eth-docker have already indicated their support and desire to integrate CSM.

Security audits & checks

As security is of paramount concern, the Community Staking team aims to have at least 2 security audits of the CSM code. Actual auditors will be defined later by the Lido Audits Committee.

Expected timeline

In case of approval, the CS team will proceed with the research and development of the module in Q1-Q2 2024, and regularly report progress on the research forum. After that, the code will be submitted for security audits. The estimated date for the audits to start is late Q2 2024.

Based on this timeline, Holesky testnet deployment for the module & test runs of different scenarios for the on-chain and off-chain tooling are assumed to happen in Q2-Q3 2024. Note that the timing heavily depends on the actual development progress, so the dates are approximate at this time.

The mainnet module release will be scheduled closer to the end of 2024 based on the results of the testnet. The goal is to have at least two finalized security audits and full testnet runs to safeguard module security and compatibility with the Lido on Ethereum core protocol.

Signal your support

Community Staking Module will allow permissionless entry to the Lido on Ethereum validator set. This will open previously unavailable avenues for validator set decentralization and diversification. The Lido Community Staking team working on the CSM is asking the DAO community to signal support for the module design and further research and development.

What approval means?

Approval of the snapshot means approval of the following items:

• High level design of Community Staking Module
• Proposed stake allocation scheme
• Proposed partnerships scheme
• Further research and development of CSM including audits