key takeaways
- Lido is looking at introducing a limit on how much ETH market share it can hold.
- The proposal comes amid concerns that the protocol could pose a potential threat to Ethereum.
- Over 30% of the total ETH supply is staked through Lido.
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A proposal to put a cap on Lido’s maximum stake is currently being debated by its community. it has been suggested that With around a third of the total supply of ETH being staked, Lido could begin to pose a potential threat to Ethereum following the transition to proof-of-stake.
30% of the total ETH supply
The Lido community is debating whether to limit the maximum amount of ETH tokens the protocol can hold.
according to offer The reasons for limiting Lido’s market share in the total supply of ETH, as determined by Vasily Shapovalov, include “the possibility of Lido’s rule being used by operators to act as one – things like multi-block MEVs.” to exploit, execute profitable re-orgs, and/or censor certain transactions” and Lido is potentially posing a systemic threat to Ethereum.
Arguments opposing the proposal include the risk of a KYC-compliant centralized exchange dominating the bet derivatives market following Lido’s self-regulation. The Lido team has stated that one of the main reasons behind the existence of Lido was to properly prevent such scenarios.
Lido is an Ethereum protocol that provides liquid staking services; When users stake their ETH with Lido they receive a liquid token representative of their stake, STETH. These tokens can then be used to earn or borrow in DeFi, while users continue to profit from staking their ETH.
A little over 30% of the total ETH supply is now via Lido, which is almost double since March. was driven by the growth rate concerns On the centralization of ETH even before the proposal was published on the Lido board.
Ethereum creator Vitalik Buterin voiced his support for the proposal on Twitter, by stating that “pricing by top stake pool providers” should be legitimized and argued that if a pool controls more than 15% of the supply it should be expected to “increase its fee rate until Keep doing it till it comes down to 15%.” Other possible suggestions for an acceptable ratio, such as 22% or 33%, were also mentioned in the Lido proposal.
On the other hand crypto personality Daegan came out against the Spartan border, argument That “multiple pool operators operating under the Unified Liquid Staking Protocol banner” were separate from a single entity having full control over the ETH staking pool.
Adding to the uncertainty surrounding Lido’s total ETH market share has been the timeline of the impending transition from proof-of-work to proof-of-stake for Ethereum. The transition, known as a “merge”, is currently scheduled for August, but has been delayed several times.
Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.
