The Vision

Lido V3 brings to life a permissionless framework for validators to stake ETH and manage withdrawal credentials via on-chain vaults. This shift enables node operators and developers to build entirely new staking products while preserving Lido's strong economic alignment.

As staking infrastructure builders, we saw this as a leap forward. But getting there came with a bit of a learning curve.

The Challenges

Here’s what we ran into while integrating with Lido V3 — and how we got through it.

1. Predeposit Formatting Requirements

Problem:

Lido’s untrusted route requires node operators to prove that the validator exists on the consensus layer before depositing the full 32 ETH. As we typically deposit 32 ETH for a full validator, we mistakenly generated deposit data for 32 ETH and manually trimmed it down to 1 ETH, which caused signature checks to silently fail. On top of that, the standard Ethereum deposit CLI JSON output didn’t align with what Lido’s staking CLI expects.

Solution:

Using ethstakers deposit CLI, we regenerated the deposit JSON using the correct 1 ETH configuration from the start, ensuring the deposit data and signatures aligned properly with Lido’s validation logic.

2. Merkle Proofs and Consensus Inclusion

Problem:

To finalize validator inclusion, we had to generate a Merkle proof showing our validator’s presence in a recent beacon state root. This was new territory — it was our first time needing to use the beacon root contract and generate a proof about data on the consensus layer.

Solution:

We leveraged the Lido CLI tool, which includes robust logic for creating Merkle proofs against a recent beacon root. Reading through the codebase, which has great comments, gave us a deeper understanding of how inclusion proofs are constructed and verified on-chain.

3. Node Operator Guarantee Timing

Problem:

Lido V3 introduces a node operator guarantee, where node operators stake their own ETH upfront as a commitment. If this guarantee wasn’t set before submitting the predeposit transactions, the vault setup would fail silently — no clear error, just a broken flow.

Solution:

We called setNodeOperatorGuarantee early in the process and then used topUp() to fund the vault before initiating deposits. This ensured the vault was initialized correctly with all required conditions met.

4. RPC and Chain Sync Errors

Problem:

While testing, we encountered intermittent RPC timeouts and inconsistent data between our execution and consensus clients. This was caused by an out-of-sync Hoodi node, which we had unknowingly used to fork our local testnet — resulting in stale state and unreliable behavior.

Solution:

We fully resynced the execution client and verified that both consensus and execution layers were using the most recent state. This stabilized our test environment and eliminated sync-related errors.

Why This Matters

This wasn’t just about integrating a new staking interface, it was about unlocking a new design space.

With Lido V3, we now have:

• Composable vaults: Custom staking flows tailored to institutional, retail, or programmatic use cases.

• Shared withdrawal contracts: Smart contract–based exits and partial withdrawals that remove operational overhead.

• New economic primitives: Greater control over delegation, fee routing, validator behavior, and staking strategies.

Combined with the Pectra upgrade, which introduced MaxEB and validator consolidation, we’re entering a new phase in Ethereum’s validator lifecycle — one that’s leaner, more scalable, and innovation-ready.

What’s Next for LIBC

At Long Island Blockchain, we’re building the next layer on top of this foundation:

• A managed staking product that enables users to delegate to secure, vault-backed validators — leveraging our high-performance infrastructure with on-chain transparency.

• Smart contracts for reward distribution, ideal for DAOs, multisigs, or enterprise treasuries needing granular reward flows.

• A hybrid custodial/non-custodial staking model, blending compliance features, vault logic, and slashing insurance for regulated environments.

Final Thoughts

The path wasn’t easy. Documentation, tooling, and concepts are developing. This is the bleeding-edge! But the payoff is undeniable. Lido V3 isn’t just a protocol upgrade — it’s a platform shift.

We’re proud to be early builders in this new chapter of Ethereum staking.

And we’re just getting started. Look for some videos on our YouTube channel in the coming weeks outlining this flow.

1. Understanding Crypto Custody Options

Crypto Custody refers to the methods and tools used to securely store the private keys that convey ownership and access of cryptocurrencies., which are essential for accessing and managing digital assets. There are two primary categories of crypto custody:

• Self and Multiple-Party Custody

  • Hardware Wallets: Devices such as Ledger, Trezor, or Grid+ store private keys offline on a portable physical device, similar to a USB stick, protecting them from online attacks. These are ideal for individuals who prioritize control over convenience.

  • Software Wallets: Mobile and desktop applications like MetaMask or Rabby provide accessible solutions for managing assets but require robust security practices to prevent breaches.

  • Multi-Signature Wallets: These wallets require multiple approvals to authorize transactions, reducing the risk of theft or accidental loss. The parties can be any combination of hardware or software wallets. They can also integrate smart contracts, programmable conditions for executing a transaction, for powerful automation capabilities. Learn more on smart contracts here.

• Custodial Solutions:

  • Centralized Exchanges: Platforms like Coinbase and Kraken provide custody services, but users must trust the exchange’s security measures.

  • Institutional Custodians: Services such as Anchorage and BitGo offer professional-grade solutions tailored for businesses and high-net-worth individuals.

Each option has unique advantages and challenges, requiring careful consideration based on the user’s needs, technical expertise, and risk tolerance.

2. Why Estate Planning Must Change with Crypto

The decentralized nature of cryptocurrencies fundamentally alters traditional estate planning. Unlike conventional assets, crypto holdings are accessed through encrypted private keys, also known as a seed phrase, making them immune to conventional account recovery methods or institutional oversight. This shift introduces new challenges and demands innovative solutions to ensure these assets are effectively passed on to heirs.

• Unique Accessibility Requirements: Traditional wills and trusts often lack the mechanisms to deal with digital keys and wallets. Estate plans must explicitly address how heirs will access these assets without compromising security.

• Heightened Security Needs: The irreversible nature of blockchain transactions means that planning must safeguard against loss or theft while ensuring that heirs can retrieve assets when needed.

• Regulatory Complexity: Cryptocurrencies operate in a legal gray area in many jurisdictions, with evolving tax and inheritance laws. Estate plans must account for these complexities to ensure compliance and avoid future disputes.  It is also advisable that the estate plan is reviewed regularly to account for regulatory changes and adjust accordingly.

3. Integrating Crypto Custody into Estate Planning

Here are the steps to incorporate crypto custody into your estate plan effectively:

a) Inventory Your Assets: Create a detailed list of all crypto holdings, including wallet addresses, custodial accounts, and the platforms used. This inventory should include the cost basis of each asset and indicate its intended distribution.

b) Secure Documentation:

• Backup Private Keys: Store private keys and recovery phrases in a fireproof and waterproof safe. Avoid sharing keys openly in wills, which could become public documents.

• Use Digital Vaults: Multi-signature and smart-contract wallet solutions can provide secure storage and access for heirs.

c) Appoint a Digital Executor: Designate a trusted individual or professional familiar with cryptocurrency to manage the transfer of digital assets upon your passing.

d) Leverage Smart Contracts: Automate asset distribution with blockchain-based smart contracts software providers that execute asset transfer based on predefined conditions, reducing the risk of disputes or mismanagement.

e) Regular Updates: The value and nature of crypto portfolios can change rapidly. Periodically review and update your estate plan to reflect current holdings and any changes in laws or technologies.

f) Collaborate with Professionals: Work with estate planning attorneys, financial advisors, and crypto experts to ensure all legal and technical aspects are addressed comprehensively.

4. Key Considerations for Heirs

For beneficiaries inheriting crypto assets, understanding the steps to access and manage these holdings is crucial. Heirs should:

• Learn the basics of cryptocurrencies and blockchain technology.

• Understand the security practices associated with self-custody or custodial solutions.

• Seek professional guidance to navigate tax implications and legal requirements.

Integrating crypto custody into estate planning is essential for safeguarding digital wealth and ensuring its smooth transition to the next generation. By leveraging secure custody solutions, documenting access methods, and working with professionals, individuals can protect their crypto assets and provide peace of mind for their heirs.

Special thanks to Chris Brodersen from EisnerAmper for feedback and review

If you’re interested to learn more, please contact Long Island Blockchain (craig@liblockchain.org)