Soon fetters on Ethereum. Last September, the network Ethereum finalized its transition from proof of work to proof of stake. At the same time, the services of liquid staking have experienced a significant growth. Nevertheless, this situation generates important questions about the centralization of staking on Ethereum.
A limitation of staking on Ethereum
It has been several years since Ethereum began its transition to proof of stake. Thus, last September, miners were replaced by validators.
In parallel, several protocols known as liquid staking have seen the day. These allow you to participate in staking, while keeping the Liquid Deposited ETH. Effectively, these protocols issue a tokenized version of the staking deposit, which can be traded or used on other DeFi protocols.
On August 31, community health consultant Superphiz unveiled an agreement reached by several liquid staking providers. Indeed, the latter have decided to set up self-limits on deposits so that they do not exceed 22% market share to fight against the centralization of staking.
“These providers have committed (or are in the process of committing) to self-limiting 22% of Ethereum validators. This is how our channel will be successful: Coordination over greed. Cooperation rather than the ‘winner-takes-all’ principle. »
Superphiz
Among the participants we find Rocketpool, Stakewise, Stager Labs And Diva staking. However, a major player is missing: Lido.
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Lido: the great absentee from this agreement
As several observers have pointed out, Lido is conspicuously absent from this agreement. Lido is currently the main provider of Liquid Staking. Indeed, the protocol has more 8 million ETH deposited in staking. This represents 32% staking on Ethereum. Unfortunately, exceed 30% staking with a single validator may result in excessive centralization. Indeed, this can compromise the security and decentralization of the network.
However, such proposal was also submitted to Lido protocol governance last June. Unfortunately, this was largely rejected by the governance with 99.8% users with voted against the proposal.
As the underlines Mippo in response to Superphiz’s announcement, these protocols made such a decision precisely because they do not hold not as much market share as Lido :
“Yes, because they have a lot less market share than that now… easy to chirp from the cheap seats. It has nothing to do with ‘Ethereum alignment’. None of these teams would self-limit in Lido’s place. Everyone is doing what is economically selfish and rational here. »
For their part, the layers 2 of Ethereum continue to experience great growth. In fact, these have greatly surpassed Ethereum in terms of activityallowing the network to process up to five times more transactions.
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