• 09 October, 2024
News

Ethereum Staking Giants Embrace 22% Self-Limit for Decentralization

Ethereum Staking Giants Embrace 22% Self-Limit for Decentralization

In a groundbreaking move aimed at preserving the decentralization of the Ethereum network, five prominent Ethereum liquid staking providers have already implemented or are in the process of enforcing a self-imposed cap, limiting their ownership to 22% of the Ethereum staking market. This initiative reflects a collective effort to ensure the Ethereum ecosystem remains open and distributed.

Ethereum liquid Providers such as Rocket Pool, StakeWise, Stader Labs, and Diva Staking lead the charge in embracing this self-limit rule. Ethereum core developer Superphiz revealed these commitments in a Twitter post, shedding light on the cryptocurrency community’s dedication to safeguarding the network’s integrity.

Puffer Finance, another significant player in the liquid staking arena, has also declared its unwavering commitment to the 22% self-imposed cap, underscoring the industry’s growing consensus on the importance of decentralization. The primary motivation behind this proposal is to address mounting concerns regarding the centralization of Ethereum staking. Setting the limit at 22% holds a strategic significance, as it requires a collusion of at least four major entities to reach consensus and influence Ethereum’s finality.

Finality, a critical milestone in blockchain technology, ensures that transactions within a block are irrevocable and secure. Superphiz introduced this innovative concept in May 2022, challenging staking pools to prioritize the network’s health over their profit margins.

However, it’s worth noting that the largest Ethereum liquid staking provider, Lido Finance, deviates from the consensus. In a vote with an overwhelming 99.81% majority, Lido opted not to impose self-limitations back in June.

Lido Finance currently dominates the Ethereum staking landscape, boasting a 32.4% share of all staked Ether. At the same time, the next competitor, Coinbase, holds a comparatively modest 8.7% of the market, according to data from Dune Analytics.

Critics argue that the self limit proposal does not necessarily align with the principle of “Ethereum alignment,” which promotes credible neutrality and permissionless innovation within the Ethereum ecosystem. They contend that those advocating for this proposal might have different intentions if they were in Lido’s dominant position.

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