Upgrade: Last Friday, crypto’s leading liquid staking protocol, Lido, went live with its newest version on Ethereum. Dubbed Lido v3, the upgrade is designed to give institutions such as asset managers greater control over their ETH staking setups. At the same time, it preserves access to on-demand liquidity through liquid staking, a combination intended to lower barriers to entry and drive broader institutional adoption of ETH staking.
First mover and market leader: By introducing liquid staking on Ethereum in 2020, Lido materially improved capital efficiency for staked ETH. Today, around 23% of all staked ETH (≈ 8.5 million ETH, representing roughly 7% of total supply) is staked through Lido, cementing its position as the market leader and making stETH the most liquid liquid staking token.
Why it matters: Lido’s battle-tested infrastructure and deep stETH liquidity are already key reasons it is used by major asset managers, including WisdomTree, for fully staked ETH ETPs. However, more conservative and less crypto-native institutions often require greater control over staking operations than the core Lido protocol provides. Lido v3 addresses this gap by offering a more flexible and customizable staking framework designed to meet institutional requirements.
"A major piece of feedback we've received from institutions is the desire for greater customization, including the ability to choose between node operators, select the custodian, and decide if and when to mint stETH. With Lido v3, we are delivering exactly that," Kean Gilbert, Head of Institutional Relations at Lido, told us.
How it works: With Lido v3, institutions are no longer limited to Lido’s standard pooled configuration. Instead, they can deploy dedicated staking vaults with clearly defined parameters, such as node operator selection, fee structure, and risk controls, while continuing to stake ETH through Lido’s existing infrastructure and network of more than 800 node operators.
The best of both worlds? Crucially, stETH is no longer mandatory. Institutions can stake ETH natively by default and only mint stETH against the staked position if and when liquidity is required. This sets Lido v3 apart from traditional staking providers by combining institutional-grade customization with access to near-instant liquidity, bringing flexibility and capital efficiency together in a single framework.
Fully staked ETPs: According to Gilbert, this is particularly relevant for ETP issuers looking to launch fully staked ETH products, without relying on a liquid staking token as the underlying asset.
“From our conversations with issuers, many want to offer investors exposure to natively staked ETH rather than a liquid staking token, as it does not require additional education. With v3’s vault structure, this becomes possible, allowing issuers to launch a natively staked ETF while still accessing liquidity by minting and selling stETH as needed to meet redemptions.”
Beyond ETP issuers: While fully staked ETPs are a key application, the same vault architecture also enables yield-focused strategies. Crypto-native asset managers and ETH-focused DATs can use vaults to enhance staking returns, for example through looping or other DeFi-based strategies. These approaches remain optional and operationally segregated, allowing institutional and crypto-native use cases to coexist on the same infrastructure without sharing risk.
Adrian Fritz is Chief Investment Strategist at 21shares, a leading crypto ETP issuer, which oversees over $10 billion in assets.
As staked ETH ETF listings in the U.S. are expected to pick up significantly this year, Lido seems to be strategically positioning itself to serve rising institutional demand.
In this context, the changes introduced around operator selection in v3 matter for two core reasons. First, compliance. A U.S.-based entity cannot stake through validators in restricted jurisdictions.
Second, risk isolation. Under Lido’s v2 model, losses caused by any validator were shared across all stakers, forcing institutions to bear risks they neither selected nor controlled. With v3 vaults, exposure is limited to KYC’d validators an institution has explicitly chosen, enabling far more robust risk management.
Combined with the deep liquidity of stETH, these changes position Lido as the most practical choice for asset managers launching staked ETH products.
