Ethereum staking comes with a trade-off between control and liquidity. With native staking, the staker keeps full control and can choose their operator, fees, and software, but staked ETH stays locked until it's exited from the withdrawal queue. With liquid staking through Lido's Core Pool, liquidity comes back as stETH at a 1:1 rate, but validator choice is lost because the protocol automatically distributes stake across a range of modules.
stVaults is designed to give stakers a new alternative that combines control and liquidity. Introduced in Lido V3, stVaults are non-custodial smart contracts that let a staker delegate ETH to a chosen operator while keeping control of the withdrawal credentials. stETH can be minted on-demand against staked deposits to give stakers liquidity without the obligation and time delays that come with exiting native staking positions. The result is a more open validator marketplace where stakers pick operators and terms while still staying connected to the stETH ecosystem.
Motivation
Lido Core works for most stakers because it is simple, liquid, and widely integrated across DeFi. As the staking market grows to include new participants, new use cases are emerging that are not addressed by the shared pool model.
Institutional stakers often need dedicated setups with specific node operators to meet compliance requirements, maintain auditable relationships, and keep assets segregated. Node operators want to attract stake directly instead of waiting for Lido's Staking Router to allocate it to them. Vault builders and asset managers want to create leverage strategies, restaking products, and structured reward bearing instruments that a shared pool was never built to support.
stVaults sit alongside the Core Pool as a modular building block. Each stVault is independent, with a single operator and a single owner. These two parties set the parameters, including fees, validator configuration, and risk tolerance.
With stVaults, Lido shifts from a liquid staking protocol to Ethereum staking infrastructure. It becomes a shared platform where different staking setups can coexist, with stETH as the common liquidity layer.
Who Uses stVaults
Delegate your ETH to a third-party Node Operator who runs validators for you. This approach lowers technical barriers and reduces the minimum ETH requirement. Depending on the setup, delegated staking can be custodial or non-custodial, meaning you may retain full control over your funds or entrust them to the operator, and relies on the operator's integrity and security practices.
ETFs, ETPs, custodians, and liquid funds can set up dedicated vaults with specific operators, control who can deposit, and manage withdrawals under their own rules. The setup stays non-custodial: vault owners keep control, and stETH liquidity remains available to process withdrawals.
Many institutions cannot use shared pools where the counterparty relationship is effectively undefined. stVaults let them stake with a specific operator under a clear, auditable arrangement while still getting liquid staking economics.
stVaults create an entirely new business model for Node Operators, enabling them to build bespoke staking setups backed by stETH liquidity, and keeping direct ownership over staking rewards. Operators can launch vaults, offer stakers access to stETH under customized terms, and run multiple vaults in parallel with different stakers, geographies, fee structures, and validator configurations. This creates a direct channel to institutional capital, while maintaining the network advantages that come with stETH, including DeFi integration and market-leading liquidity depth.
As an example, a single operator might run one vault with a 3% fee for retail users, another at 1% for a large institutional client, and a third with custom validator client requirements for a compliance-sensitive fund. Each vault operates independently on the same operational infrastructure.
stVaults are composable building blocks. Restaking protocols can add extra reward layers, vault wrappers can create structured products, and yield tokenization platforms can provide early access to future rewards. The validator logic remains local to each vault while enabling integration with the broader DeFi ecosystem.
DeFi Wrapper, a simple low-code toolkit built on top of stVaults, extends this further by enabling teams to build pooled products, reward bearing strategies, and leverage loops.
For capital-efficient strategies, stETH can be minted, posted as collateral on lending protocols, and used to borrow ETH to stake again. This enables leverage loops, restaking opportunities, and reward optimization, all built on top of a single underlying staking position.
How stVaults Work
stVaults extend the Lido protocol to include operator selection and vault customization. Stakers choose an operator and deposit ETH, with the option to unstake at any time. Minting stETH is optional. Minting is overcollateralized: only a portion of the vault's ETH can be used to back minted stETH, with the remainder held in reserve. To fully exit a vault with outstanding stETH, the minted amount plus accrued fees must be repaid first.
The fundamental principle of stETH remains unchanged: one stETH represents one staked ETH and can be redeemed through the withdrawal queue. What differs is the backing structure. Previously, all backing came from the Core Pool. Now two sources exist: ETH held within the Core Pool (internal backing) and ETH staked through stVaults (external backing). Both contribute to the total stETH supply.
The Core Pool serves as the APR oracle that stVaults use for fee calculations. Without it, the system could neither price stVault fees consistently nor guarantee stETH redeemability.
Overcollateralized Minting
Core Pool mints stETH at a 1:1 ratio. stVaults stETH is overcollaterized. stVaults retain a portion of deposited ETH - defined by the Reserve Ratio - as a buffer against slashing losses. This overcollateralization preserves stETH fungibility.
stVaults vs Lido Staking Protocol
| Aspect | Lido Staking Protocol | stVaults |
|---|---|---|
| Operator selection | Allocates automatically across a diversified validator set | Stakers select their operator directly |
| Customization | Standardized — uniform fee structure for stakers, uniform risk profile | Configurable per vault: fees, validator configurations, risk-reward profiles |
| stETH minting | Mints at 1:1, minted automatically upon deposit | On-demand and overcollateralized |
| Risk isolation | Socializes rewards and penalties across all stETH holders | Absorbs own losses — slashing in one vault does not propagate to other vaults served by different Node Operators |
| Custody model | Non-custodial | Non-custodial with more direct control; withdrawal credentials point to vault contract, EIP-7002 allows direct validator exits |
Core Actors:
Vault Owner
The staker owns the vault, deposits ETH, and controls the staking position. The vault owner selects the operator, decides whether to mint stETH, and retains authority over all operational decisions: additional deposits, withdrawals, minting, repayment, and rebalancing. The vault owner and operator bear primary economic responsibility for the position, including maintaining collateralization.
Node Operator
The party that runs validators using the vault's ETH. Operators determine which validators receive deposits, manage validator lifecycle, and earn fees on staking rewards. A single operator can manage multiple vaults. Operators hold validator keys for performing duties but cannot access deposited funds because withdrawal credentials are controlled by the vault contract.
Lido DAO
The governance layer that sets protocol-level parameters: fee rates, risk thresholds, operator onboarding criteria, and vault upgrade policies. Individual vaults retain autonomy over their own configurations within the boundaries established by governance.
Infrastructure
Each vault is isolated, but it still depends on Lido Protocol services:
VaultHub serves as the central registry and coordination point for protocol services. Vaults call VaultHub to mint and burn stETH. VaultHub enforces minting limits, reserve requirements, and fee collection.
OperatorGrid organizes vaults by risk tier and operator. It assigns reserve ratios, share limits, forced rebalance thresholds, and fee rates. It tracks cumulative stETH minted across all vaults.
PredepositGuarantee (PDG) protects against front-running vulnerabilities during validator deposits: a risk that could otherwise allow operators to steal deposited funds.
LazyOracle handles accounting reports for vaults. It verifies data from the oracle network and forwards updates to VaultHub. Suspicious value increases - anomalous reward spikes - are quarantined for three days before being credited, preventing oracle manipulation.
VaultFactory deploys verified vault instances in a single transaction. VaultHub rejects any vault not deployed through the factory, ensuring contract code is verified and storage is untampered.