Ethereum Liquid Staking Providers Commit To Better Decentralization

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In a proactive step towards maintaining Ethereum’s decentralized nature, numerous Ethereum liquid staking providers are initiating a self-imposed cap on their market share. This move comes as part of their pledge not to exceed 22% of the Ethereum staking market.

The Path to Decentralized Liquid Staking

Prominent names in the Ethereum staking realm, like Rocket Pool, StakeWise, Stader Labs, and Diva Staking, have either already embraced or are transitioning towards this self-limiting approach. Ethereum’s core developer, Superphiz, substantiated these claims. Adding to the list, Puffer Finance, another influential liquid staking service, recently publicized its dedication.

The core reason behind this initiative is the looming apprehension regarding the potential centralization of Ethereum liquid staking.

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When quizzed about the seemingly arbitrary 22% figure, Superphiz elucidated. He revealed that since 66% of validators must concur on Ethereum’s state, capping the limit under 22% ensures that a minimum of four principal entities must collude for chain finalization.

In blockchain terminology, “finality” signifies the juncture when blockchain transactions become irreversible, thus solidifying the integrity of block transactions.

The Origin of the Proposal

This innovative proposal saw the light of day in May 2022. Superphiz was at the forefront, posing a pertinent question. Would a staking pool prioritize the blockchain’s well-being over its profit margins?

However, not all have boarded this decentralization train. Lido Finance, the behemoth of Ethereum liquid staking, showcased a divergent viewpoint. In June, an overwhelming 99.81% majority of its stakeholders voted against the self-imposed limit. Superphiz, in a recent post, highlighted Lido’s ambitions, stating, “They have expressed an intention to control the majority of validators on the beacon chain.”

Lido’s current stronghold in the Ethereum staking ecosystem is undeniable. They boast a staggering 32.4% of all staked Ether. In contrast, their closest competitor, Coinbase, holds a mere 8.7%, as per Dune Analytics’ data. Such dominance by Lido has inevitably stirred discussions and concerns about “staking centralization” among the Ethereum community.

Essentially, the push for decentralization in the Ethereum liquid staking sphere is gaining momentum. Whether or not it will see universal acceptance remains an unfolding chapter in Ethereum’s story.


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