Sunday, June 16, 2024
HomeETHEthereum Staking Providers Commit to 22% Self-Limit to Ensure Decentralization

Ethereum Staking Providers Commit to 22% Self-Limit to Ensure Decentralization

As concerns about centralization within the Ethereum staking market grow, several prominent Ethereum liquid staking providers have taken steps to impose a self-limit rule, pledging not to control more than 22% of the Ethereum staking market. This move is aimed at safeguarding the decentralized nature of the Ethereum network.

Providers Committed to the Self-Limit Rule

According to Ethereum core developer Superphiz, at least five Ethereum staking providers have either already committed or are in the process of committing to the self-limit rule. Notable participants include Rocket Pool, StakeWise, Stader Labs, Diva Staking, and Puffer Finance. The proposal’s primary objective is to address concerns over the growing centralization of Ethereum staking.

The Rationale Behind the 22% Limit

Superphiz explained that the 22% limit was chosen because, for Ethereum to reach a state of finality, 66% of validators need to agree on the state of the network. By setting the limit below 22%, it becomes necessary for at least four major entities to collude in order to manipulate the blockchain’s finalization. Finality represents the point at which transactions on a blockchain are considered immutable, ensuring that the contents of a block cannot be altered. The idea for this self-limit rule was initially proposed by Superphiz in May 2022 when he questioned whether staking pools would prioritize the network’s health over their own profits.

Lido Finance’s Position

Interestingly, the largest Ethereum liquid staking provider, Lido Finance, did not commit to the self-limit rule, voting against it with a 99.81% majority in June. This decision raised concerns as Lido currently dominates the Ethereum staking market, accounting for a substantial 32.4% of all staked Ether. In comparison, the next largest entity, Coinbase, holds only 8.7% of the market, according to data from Dune Analytics.

Debates Over Centralization

The self-limit proposal has sparked debates within the Ethereum community. Some argue that it has nothing to do with “Ethereum alignment,” a principle aimed at ensuring credible neutrality and permissionless innovation on the Ethereum network. Critics have also cautioned against shaming user-friendly solutions as greedy products and instead focus on addressing potential centralization issues. However, others view Lido’s dominant market share as concerning and selfish, calling for measures to ensure a more decentralized staking ecosystem. The ongoing discussion highlights the complex dynamics of decentralization and market competition within the Ethereum network, emphasizing the need for continuous efforts to maintain a balanced and secure blockchain ecosystem.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

twenty − fifteen =

- Advertisment -

Most Popular