When 8 Million ETH Start 'Moving': Post-Pectra Era, Will Staking Undergo Structural Seismic Changes?

By: imToken

Recently, there was a major news story overlooked by the market: Lido is "moving" over 8 million ETH (approximately $16 billion).

Of course, this does not mean transferring funds from Lido to another new protocol, but rather gradually migrating the hundreds of thousands of traditional validators supporting stETH into the new validator architecture launched after the Pectra upgrade.

According to Lido's plan, over 265,000 validators using the old version 0x01 withdrawal credentials will be merged successively into fewer 0x02 validators with higher balances. After the migration is complete, the total number of validators on the Ethereum network is expected to drop from about 880,000 to about 628,000, a decrease of nearly one-third. The attestation messages that need to be propagated each Epoch may also decrease by about 29%.

This will not directly reduce the Gas paid by ordinary users, nor will it suddenly speed up transaction confirmation speeds. Even to complete the migration, Lido estimates that the brief reward loss caused by the migration is equivalent to about 0.28% of the protocol's annual staking rewards.

So since the yield improvement is limited and the migration itself has costs, why is Lido still pushing this "move" on the scale of tens of billions of dollars?

The answer lies in a significant change brought by the Pectra upgrade in May 2025—compounding validators.

I. Lido is "Moving" 8 Million ETH, What Exactly is Being Moved?

On May 7, 2025, the Pectra upgrade officially went live on the Ethereum mainnet.

Among them, EIP-7251 increases the maximum effective balance of a single validator from 32 ETH to 2048 ETH and introduces withdrawal credentials starting with "0x02". Validators adopting the new credentials can keep the consensus layer rewards obtained in the Beacon Chain balance, gradually increasing the effective balance and generating new yields, thus also known as "compounding validators".

On the surface, this is just writing "automatic yield reinvestment" into the protocol, but the deeper change lies in that it breaks the long-standing fixed 32 ETH structure of Ethereum validators.

As everyone knows, the effective balance cap for Ethereum validators has always been fixed at 32 ETH. Regardless of whether it subsequently grows to 33 ETH or higher, the effective balance truly participating in consensus reward calculations has an upper limit of only 32 ETH. The excess part will not continue to increase its validation weight but will be regularly transferred to execution layer withdrawal addresses.

For individual stakers running only one or a few validators, if they want rewards to continue participating in native staking, they must accumulate scattered rewards from different validators again to reach 32 ETH. The reinvestment threshold is high, and small balances also remain outside the staking system because they are transferred to withdrawal addresses.

At the same time, for Lido, large exchanges, and professional staking service providers, although they can aggregate scattered rewards generated by a large number of users to quickly accumulate new 32 ETH, they also face another cost—for every additional 32 ETH, a new validator usually needs to be created and maintained.

It should be noted that as the Ethereum staking scale continues to grow, the number of validators also expands continuously. The underlying indexes, keys, signatures, and attestation messages increase accordingly, and operational maintenance costs rise significantly.

EIP-7251 introduced by Pectra aims to change this structure.

In the new 0x02 mode, the minimum threshold to start a validator is still 32 ETH, but the maximum effective balance of a single validator has increased to 2048 ETH. This means rewards no longer need to be automatically transferred out but can remain in the validator, continuing to increase the effective balance and generate new yields.

At the same time, multiple original validators can also be merged. For example, 2048 ETH originally scattered across 64 validators can be consolidated into one high-balance validator. The total staking weight remains unchanged, but the number of validators, keys, and network messages that need to be maintained are significantly reduced (Further Reading: "One Year Later, "Lean Ethereum" Sets Out Again: What Answer Does Ethereum Want to Deliver?").

Ultimately, funds have not exited Ethereum, and the economic security provided has not decreased, but the operational burden has significantly decreased.

What Lido is promoting is this kind of merger.

So strictly speaking, the "compounding" in compounding validators actually only explains half of its value. The other half of the value lies in the fact that validators can finally be recombined from a large number of standardized 32 ETH small units into a more streamlined infrastructure more suitable for large-scale operations.

II. What Kind of Yield Improvement Can It Bring?

Interestingly, from the yield dimension, the improvement brought by compounding is not evenly distributed.

Theoretically, whether individual stakers or large institutions, all can reduce idle balances through 0x02, allowing rewards to participate more directly in subsequent staking. However, due to different capital management capabilities of different participants, the marginal benefits brought by the upgrade are not the same.

The paper "When Staking Rewards Compound: Measuring the Impact of Ethereum's Pectra Upgrade" released in June 2026 compares the yield performance of 0x01 and 0x02 validators.

Simulation results show that in the balance range of 32 ETH to 2048 ETH, the consensus layer APR of 0x01 validators is about 2.17% on average, and 0x02 validators are about 2.26%. The relative improvement of the latter is about 4.7%. However, when the staking scale reaches 8192 ETH to 10240 ETH, the relative gap between the two will shrink to about 0.3%.

It is especially important to note here that the "about 4.7%" mentioned in the paper does not mean the APR increases directly by 4.7 percentage points. It refers to obtaining a relative improvement of about 4.7% on the basis of the original consensus layer APR of about 2% to 3%.

And the core reason why the improvement for smaller-scale stakers is more obvious is not that they have some exclusive yield, but that it was harder for them to complete reinvestment in the past.

For example, if a user has only one 32 ETH validator, after their rewards are automatically transferred to the withdrawal address, they need to continue accumulating for a long time, or merge with other funds, to accumulate enough 32 ETH again and start the next validator. Moreover, the part of the amount less than 32 ETH is still scattered in different addresses, and the willingness to collect is naturally very low.

But 0x02 validators allow these funds to continue increasing the effective balance in the same validator, thereby reducing idle funds formed by "less than 32 ETH". Ultimately, what small-scale stakers lacked in the past was not only the willingness to reinvest, but also the ability to reinvest scattered ETH into native staking.

Large staking service providers can also benefit from native compounding. However, they originally had stronger fund collection capabilities and could quickly accumulate new 32 ETH to start the next validator. From the perspective of the entire fund pool, they can also achieve capital allocation effects close to compounding.

Therefore, the larger the staking scale, the lower the proportion of scattered balances to total funds, and naturally, the marginal improvement brought by 0x02 is also smaller.

But this does not mean that 0x02 is not important for large institutions.

On the contrary, the core problem faced by large institutions is shifting from "how to make rewards continue to generate yields" to "how to manage more ETH with fewer validators".

For them, the value of 0x02 is more reflected in two aspects: on the one hand, rewards can remain in the validator to continue compounding, reducing frequent collection, redeposit, and validator creation operations; on the other hand, the original large number of 32 ETH validators can be merged, significantly reducing the management costs of nodes, keys, and consensus layer messages.

Of course, this change will also bring new trade-offs.

Traditional 0x01 validators will automatically transfer rewards exceeding 32 ETH to withdrawal addresses without needing to initiate on-chain operations actively; 0x02 defaults to keeping rewards in the validator. If large service providers want to meet user redemptions or schedule liquidity, they need to actively initiate partial withdrawals and redesign accounting, reward distribution, and fund buffer mechanisms.

Therefore, for small-scale stakers, the most direct value of 0x02 is to lower the reinvestment threshold and reduce idle funds; for large institutions, although the yield improvement is smaller, the improvement in validator merger and infrastructure efficiency is instead more important.

Both benefit from the same mechanism, only the yield sources and priorities are not the same.

III. Changes and Unchanged in the Ethereum Staking Ecosystem

So if only starting from APR, one will find that Lido's migration is not a particularly attractive business.

After all, the yield improvement gained by large service providers through compounding may be less than 1%, brief reward losses will also occur during the migration process, and the original accounting, withdrawal, and liquidity management systems also need to be adjusted accordingly.

But Lido still decided to push this largest-scale core architecture upgrade since V2 in 2023. It is because when the funds managed by the protocol reach over 8 million ETH, the number of validators itself begins to become a cost.

Especially after the Pectra upgrade, the staking weight carried by a 2048 ETH validator can be equivalent to 64 traditional validators, which means more capital can be managed more efficiently with fewer validators.

In fact, Lido's upgrade is not just about merging validators.

After migrating to Curated Module v2, its professional node operators need to lock ETH as margin for the first time. If operational interruptions, slashing, reward mismatches, or other attributable issues occur, the margin can be used to cover losses.

In the past, Lido's curated node operators mainly relied on historical performance and reputation to gain trust. Now reputation is still retained, but a layer of real capital constraint has been added on top. The existing 34 curated node operators are expected to migrate to CMv2 and did not choose to exit due to margin requirements.

This change may be more worthy of attention than compounding itself, and also means the Staking competition standards after Pectra are undergoing structural huge changes, making the differences between future staking services may be more reflected in how to improve effective capital utilization, how to manage withdrawals and liquidity, how to allocate validator risks, and how to achieve a balance between asset control rights, operational complexity, and yields.

For user entrances such as wallets, the value is no longer just displaying a yield number to users, but also needs to help users see clearly the fund paths and risk structures behind different staking methods. Taking imToken Stake as an example:

• Currently, users can directly enter the staking function from the ETH asset page and select corresponding services according to fund scale and needs. For users who hope to participate with smaller amounts, they can complete operations through the staking service integrated within the wallet;
• For users holding more than 32 ETH who hope to retain asset control rights, they can also choose non-custodial validator solutions, participating in Ethereum native Staking while avoiding maintaining nodes themselves;

As compounding validators gradually become popular, the content that such entrances need to present will also become more and more, such as whether yields are automatically reinvested, when rewards can be withdrawn, which withdrawal credentials the validator adopts, who controls the funds, and what technical and liquidity risks different schemes need to bear.

This also means that the wallet is no longer connected to just a Staking yield page, but a set of continuously differentiating validator services.

Finally

Overall, from The Merge to the Shanghai upgrade, and then to the Pectra upgrade, Ethereum is gradually completing the lifecycle of Staking.

The Merge made validators the core of network security, the Shanghai upgrade solved the problem of how staked funds exit, and the Pectra upgrade began to further optimize how funds enter, accumulate, and reorganize.

Of course, compounding validators will not give all participants the same magnitude of yield improvement:

• For small-scale stakers, it can reduce idle balances, allowing long-held ETH to participate more fully in consensus;
• For large institutions, its more important value may not be increasing APR, but reducing the number of validators and lowering operational burdens.

Therefore, the migration of 0x02 validators is destined to be gradual. Different participants will choose to continue retaining original validators or gradually shift to the compounding mode based on their own fund scale, liquidity needs, and operational structure.

But the way Ethereum organizes staked capital is already undergoing structural huge changes step by step. Especially when validators are no longer fixed at 32 ETH, the Staking ecosystem also begins to move from standardized yield products towards more segmented capital management and infrastructure competition.

This is also an Ethereum Staking paradigm shift worthy of long-term tracking.