Lido dominates over 30% of the staking market liquidity! Does Ethereum network really need the 22% validation limit?
Ethereum developer Superphiz tweeted to call for collaboration from on-chain liquidity providers to limit their market share to no more than 22% of the overall network, in order to ensure decentralization. Currently, six teams have committed to the initiative, while leading staking protocol Lido has expressed opposition, and some in the community are unclear about the necessity and effectiveness of this move.
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Six Agreements Team Commits to Self-Restriction Rules
Expressing concerns over the growing centralization of the Ethereum network, Superphiz hopes that liquidity staking service providers will assist in self-restraint by verifying that their stake does not exceed 22% of the overall network.
These providers are committed (or are in the process of committing) to self-limit to <22% of Ethereum validators. This is how our chain will be successful: Coordination above greed. Cooperation instead of winner-take-all.@Rocket_Pool @stakewise_io @staderlabs @divastaking
— superphiz.eth 🦇🔊🛡️ (@superphiz) August 30, 2023
He explained that the Ethereum network requires 66% of nodes to agree for verification to pass, and having less than 22% means that at least four protocol entities need to reach consensus to confirm the final state of a block, which helps to distribute power.
Opposition from Lido?
It is worth noting that Lido, the largest liquidity staking protocol on Ethereum, expressed opposition to this.
According to the results of an on-chain vote initiated by the Lido team in June, it was decided by 99.81% not to implement self-restriction, expressing an intent to control the majority of validators on the chain.
Some Lido usersclaimed they were unaware and speculated that some stakers were also unaware of this event and the vote.
Reportedly, the Lido protocol currently dominates theEthereum liquidity staking market, holding a market share of 32.4%, while the second-place Coinbase only has 8.7%.
Data from DeFiLlama also shows that Lido's TVL total locked value is seven times that of runner-up Coinbase, making it the undisputed leader.
Community Questions the Necessity and Effectiveness
Most of the communityexpressed skepticism about this vote, stating that it is very easy for protocols with a market share far below 22% of the liquidity staking market to achieve self-restriction. However, if they were to hold more than 20% of the market share today, they would not participate in this discussion, especially since the details of implementation have not yet been mentioned.
Yeah because they have way less market share than that now… easy to chirp from the cheap seats.
This has nothing to do with “Ethereum alignment.” None of these teams would self limit were they in Lido’s place.
Everyone is doing the economically selfish and rational thing…
— Mippo 🟪 (@MikeIppolito_) August 31, 2023
According to Dune data, Rocket Pool, StakeWise, Stader Labs, and Diva Stake, which initially committed to compliance, currently have market shares of 3%, 0.3%, 0.1%, and less than 0.1%, respectively.
Additionally, some usersstrongly oppose this, claiming that user-friendly products or solutions like Lido should not be viewed as greedy products.
Building better liquidity staking products to compete and reduce the market share of major participants may be a more decentralized and market-oriented approach.