If the limit is 10 and I have around 100 keys as a solo staker, i need 7 more EA NOs to achieve max rewards.
I will pay $100 for private keys to a whitelisted EA address.
I’m concerned that professional operators will find ways to bypass the APR decrease, just as they did when switching from curated to Lido CSM. Personally, I have three solo addresses available—I won’t game the system, but I could. So it’s safe to assume some will try, and some will likely succeed.
The best solution might be an EA node operator with a way to verify identities (KYC) without exposing personal information. Non-intrusive KYC solutions exist, but none are perfect. For example, with Worldcoin, I could simply pay for another ID, allowing me to run multiple nodes. It makes cheating harder, but not impossible. The goal should be to make it difficult enough to deter most attempts.
2 Likes
Proposal: Update keyRemovalCharge parameter in CSM
The keyRemovalCharge is one of the safety parameters in the Community Staking Module (CSM). Initially, this value was set to 0.05 ETH, with the rationale detailed in the original post: Lido Research Forum – CSM Parameter Discussion.
Since that time, Ethereum gas prices have decreased significantly. The current 8-month average gas price is approximately 11 Gwei. For conservative estimation, we use a higher value of 20 Gwei as the maximum expected gas price.
Following the same methodology used in the original calculation:
Estimated gas cost for queue cleanup: 1,000,000 gas * 20 Gwei = 0.02 ETH
Based on this updated estimate, it is proposed that the keyRemovalCharge be reduced from 0.05 ETH to 0.02 ETH.
This change ensures the parameter remains aligned with current network conditions while maintaining its safety function.
14 Likes
Proposal: CSM stake share limit increase
CSM has reached its stake share limit. This means new CSM validators can be deposited only if Lido protocol TVL increases or some current validators exit. This fact limits the future growth of the Lido on Ethereum Node Operator set. Also, about 50 new Node Operators are in the CSM deposit queue.
If the conditions below are met, it is proposed that the CSM stake share limit (stakeShareLimit) be increased from 2% to 3%.
To maintain consistency of the stake share limit parameters in the Staking Router, it is proposed to set the priorityExitShareThreshold to 375 BP (3.75%), maintaining the existing ratio.
Since CSM is not the only staking module in Lido on Ethereum, stake distribution in the other modules should be accounted for while increasing the CSM stake share limit. The following conditions should be met before increasing the CSM stake share limit:
- SimpleDVT module should have all of the depositable validators deposited;
- Curated Node Operator Pier Two should get at least a minimum viable number of active validators (1000) not to operate on the loss (after the rotation, they are sitting at zero active keys following the Snapshot vote on Nov 2024).
Should the CSM v2 release be approved by the Lido DAO and be ready before the conditions above are met, the CSM Stake Share Limit can be increased alongside the v2 on-chain release, regardless of whether those conditions have been fulfilled.
12 Likes
Proposal: CSM v2 staking rewards structure
Preface
CSM v2 is expected to go live on the mainnet in 2025. Its primary goal is to continue supporting and growing Ethereum Home Staking. The introduction of the Node Operator types feature will allow CSM v2 to offer differentiated protocol interactions between Identified Community Stakers and other permissionless participants.
This post aims to outline a new staking rewards structure in CSM v2 that will allow Lido protocol to continue supporting Home Stakers while maintaining CSM’s competitive market position.
Capital Multiplier
The term “Capital multiplier” will be used below to compare the proposed CSM rewards structure with the market. A CM value of 1 basically means “receive the same amount of rewards per ETH as vanilla staking”.
Capital Multiplier (CM) - A multiplier denoting the amount of ETH (
x * CM) that would need to actively be staked via vanilla staking in order for the expected gross rewards from such staking to be equivalent to the expected gross rewards from participating in the compared-to staking solution with an amount of ETH (x).
More on capital multiplier here.
Beneficial Staking Rewards for Community Stakers
One of the ultimate goals of CSM is to enfranchise independent staker participation in the Lido protocol and Ethereum network. The current version of CSM supports a simple flat rewards structure, with higher than protocol-average staking rewards for both Community Stakers and Permissionless Node Operators, no matter their size or type. This approach creates an imbalance in the incentives, allowing large operators to benefit from the increased staking rewards while diluting small Community Stakers’ and stETH holders’ reward share. In CSM v2, the introduction of Node Operator types and the functionality to tailor protocol interactions based on a Node Operator’s type makes it possible to address the stated goal in a more focused manner. It’s proposed to accomplish this through the use of a “baseline” rewards share that will apply to all permissionless and unknown operators (for each and every validator operated), which can then be tailored for each Node Operator type supported by the relevant module.
For Identified Community Stakers in CSM v2, it is proposed to maintain the current reward share (6% of staking rewards) for the first 16 validators (21 ETH worth of bond) while keeping bond requirements unchanged so that:
- 16 validators (21 ETH worth of bond) will allow the majority of Identified Community Stakers* to benefit from increased fees while not creating an explicit incentive to exit solo validators (min 32 ETH);
- The number of the validators (or ETH-equivalent) eligible for increased staking rewards is limited, meaning that even if large operators are identified as Community Stakers, the relative impact of these increased staking rewards is more pronounced for smaller stakers and incentive to abuse this mechanism by Professional operators possibly is limited;
The proposed approach will allow Identified Community Stakers to reach a capital multiplier of 2.36 for their first 16 validators (~2.5x the current average validators per Node Operator in CSM v1), with a decreasing capital multiplier for additional validators operated.
All validators controlled by Permissionless Node Operators will receive the baseline staking rewards described below. The same applies to the validators after the 16th for the Identified Community Stakers.
* The Community Staker identification framework is currently being researched and will be shared with the community for feedback soon.
Baseline rewards share
Currently, only Rocket Pool and Stader offer permissionless home staking solutions, while others are either permissioned (Ether.fi) or currently not accepting node registrations (Puffer). DVT providers like Obol and SSV allow permissionless home staking but provide no capital multiplier.
| Procotol | Capital multiplier |
|---|---|
| Rocket Pool (Saturn-1) | 1.35* |
| Stader | 1.46 |
* - with pure ETH staking without RPL
Contributors working on CSM v2 believe that setting the default Node Operator reward share to 3.5% while keeping bond requirements unchanged would fulfill the goals set out in the CSM Evolution post, allowing CSM to scale while providing competitive rewards with other modules and the rest of the market. This would result in a default CSM v2 capital multiplier of 1.76, which is still market-leading but not cannibalistic of other modules (where node operator share may also be reconsidered in the future).
| Parameter | Value |
|---|---|
| First validator bond | 2.4 ETH |
| Subsequent validators bond | 1.3 ETH |
| Node Operator reward share | 3.5% |
| Capital multiplier | 1.76 |
Supportive materials
An important note from the graph is that the capital multiplier for the Identified Community Stakers asymptotically tends to the capital multiplier for the Permissionless Node Operators while being significantly above it even for large amounts of bond. This creates a small incentive for Identified Community Stakers to run more than 16 validators should they have enough capital for that.
10 Likes
Thank you for sharing this proposal for the CSM v2! We’d like to express our overall support for the direction and reasoning behind these changes.
1. We like the strong support for Home & Solo Stakers
We believe the proposal aligns with the core goal of the Lido CSM module: to empower and support Ethereum home stakers while maintaining an open, permissionless environment. The outlined reward structure provides meaningful capital multipliers for Identified Community Stakers (up to 2.36x for the first 16 validators), placing Lido CSM in a strong competitive position compared to permissionless alternatives like Rocket Pool or Stader.
This incentive structure continues to favor true solo/home validators, without distorting the broader staking ecosystem. It’s well-balanced and reinforces Lido’s commitment to decentralization and inclusivity.
- Equal Application of Bonding & Reward Ratios
We understand from the proposal that both bonding requirements and reward shares are applied uniformly to all operators within each category. We support this clear and consistent approach, as it promotes fairness and removes ambiguity, while ensuring that home stakers can confidently plan their capital commitments.
- Value of Professional Node Operators in CSM
As we’ve seen some resistance against professional NOs using the CSM module, we would also like to take this opportunity to highlight our position that professional Node Operators should be encouraged to participate in Lido CSM, rather than being redirected to curated sets.
CSM offers a way for professional NOs to put skin in the game through meaningful bond commitments, and this direct exposure to operational and capital risks aligns incentives more strongly than curated inclusion alone. As a result, the presence of professionals in CSM should not be viewed as adverse, but as a reinforcing mechanism that supports the quality, reliability, and decentralization of the module.
We believe that with these updated incentives and the upcoming capacity increase, the module will be filled again quickly. Therefore, the priority queues and fair entry systems will be critical in ensuring the module continues fulfilling its primary mission: expanding access to Ethereum staking for individuals and small-scale operators.
2 Likes
Thank you @dgusakov for the amazing and well put together proposal.
I would also point out that suggested bond structure aligns with the risk mitigation approach, suggested in Risk assessment for community staking framework, providing exceptional risk mitigation, in particular::
1. The proposed bond is sufficient to transfer the risks associated with any operational mistakes.
For any actor with up to 8 600 ETH of capital put as a bond (~ 6 641 validators), the bond completely covers:
- 3 months of offline period
- Possibility of slashing after
2. The Cost of an Attack for any intentional malicious actor (up to 16 700 ETH in bonded capital) is twice as high as the potential impact on the protocol
Pemisionless & Community Stakers Attack multiplier curves are almost completely coincide on the possible attack scale due to difference being only in initial bond volume
3. Bond curve form incentivizes registering validators on one Node Operator drastically reducing reasonable stealing opportunities, and any possible consequences
With inclusion of transaction costs into consideration, even actors considering implementing EL stealing strategy are incentivized to utilize all capital on one node operator for any amount of capital as the capital efficiency curve is increasing on all observed values
Evaluation provided under risk-averse assumption on level of CL & EL rewards (2.85% and 0.55%)
Coupled with great conditions for the Node Operators I support this proposal as a way to ensure opportunities for Module growth, while ensuring sufficient risk mitigation and sustainability for the DAO.
4 Likes
While I am generally supportive of most of the changes introduced in CSM v2, but I have concerns regarding the proposed adjustments to the rewards share. Specifically, I would like to suggest the following:
1. The rewards share changes should be implemented more gradually.
2. The portion of rewards reduced should be redistributed to CSM participants.
To begin with, the 3.5% reduction for node operators (NOs) with more than 16 keys seems too abrupt. In the initial public draft of v2 (Sorry, I noticed that the link is not allowed. This is the “CSM v2. Features draft” uploaded to hackmd in March.), the reductions were more moderate—5.4% for 10 or more keys, and 4.8% for 20 or more. I didn’t expect the final proposal to lower the rewards share even further than those examples. Even if the final goal is to arrive at the proposed 3.5%, I believe it would be more appropriate to phase in the reduction in accordance with increasing share limits, for instance, through steps like 5%, then 4%, and finally 3.5%. Is there a compelling reason to enforce the 3.5% rate immediately?
CSM v2 appears to provide more opportunities for identified small NOs, while relatively disadvantaging likely-professional NOs. The criteria used to distinguish between these groups are still a matter of debate. Currently, the primary metric seems to be the number of keys. But consider this: who is more “expert”? Someone who bought 100 ETH in 2015, forgot about it, and is now starting to stake, or a solo staker who purchased 32 ETH in 2021 and has been consistently participating since then? Until a more robust identification mechanism is introduced, this kind of key-based differentiation may not be the most reliable method.
Despite the proposed rewards reduction, CSM remains competitive, as it still offers a higher APR than many other services. Therefore, I am not entirely convinced that this change will create significantly better opportunities for small NOs who may lack technical expertise. Moreover, where will the reduced rewards go? Does it all go to the DAO treasury? From a staker’s perspective, rewards should ideally be returned to stakers in some form, rather than simply being reduced. If the aim of v2 is to encourage participation from small NOs, wouldn’t it be more effective to redirect the reduced rewards to identified NOs operating 16 or fewer keys? This would provide a clear incentive by further improving their APR compared to v1.
Lastly, I’d like to raise a concern on behalf of those who are currently in the queue, even before the CSM v2 proposal was announced. Some of them may have joined based on the attractive APR of v1, possibly taking on price volatility risks with the expectation that the CSM share limits would eventually increase. What happens to these individuals under the new rules? Are they simply expected to accept the changes?
Hello, and thanks for the great comments!
The numbers in the doc mentioned have nothing to do with the proposed reduction. It is just an example to illustrate the concept. CSM v2 Features - HackMD
The identification mechanism is currently under research and development and will be presented later.
Rewards in CSM v1 are way above the market, as shown in the research. They were set this way to incentivise community stakers’ participation at the start of CSM. Now, with the needed tech to make this benefit more precise, there is a way to make CSM reward structure fit the market.
If the CSM shareLimit is increased before the CSM v2 release and current queue members are deposited, they can exit their validators free of charge. Should there be participants in the CSM queue by the time of CSM v2 who have joined the queue before the CSM v2 reward structure announcement, keyRemovalCharge can be temporarily set to zero to allow a free-of-charge queue exit. Also, note that all CSM users have been warned about putting keys behind the depositable queue part when uploading them via the CSM UI.
Snapshot vote started
Please get your wallets ready to cast a vote 
, the CSM: stakeShareLimit and keyRemovalCharge parameters adjustment Snapshot has started! The Snapshots ends on Mon, 28 Apr 2025 16:00:00 GMT.
Thanks for sharing this proposal. I think it will help allocate more capital to community stakers, since the current model is too attractive for big players and the first ones get displaced.
I also believe that the change could be too dramatic. As an alternative, I propose putting the limit of the capital multiplier for identified community stakers twice as far: 32 validators instead of 16. This will help larger community stakers and small node operators to have more advantage over other big players.
I wonder how this will affect “CSM as a Service” platforms. I assume those validators run by these service providers will fall under the permissionless tranche of CSM V2. Is this correct?
3 Likes
It’s an interesting proposition. One thing I’d like to note here is that at 16 validators that’s ~21 ETH worth of bond, whereas at 32 validators it’s > 32 ETH worth of bond, which means it could be seen as somewhat of a direct incentivization for “full solos” to switch to CSM. IMO this isn’t desirable. That said, it’s also easier to start lower (eg at 16 validators) and then raise it if it is safe enough and the economics of it work out and there’s enough community support, rather than starting higher.
Under the default assumptions, yes, but if there’s community support for it a Gate could be proposed for Validators as a Service platforms that would perhaps allow the operators providing these services to opt into slightly different rewards curve.
4 Likes