Blockchain News

Ethereum Staking Providers Champion Decentralization with a 22% Cap: Here’s Why

The Battle for Decentralization: Key Players Make Their Move

Among the top issues facing the Ethereum network, decentralization is a primary concern. Consequently, several prominent Ethereum liquid staking providers have taken the initiative. How? By either imposing or considering the imposition of a self-limit rule. This rule ensures they won’t own more than 22% of the Ethereum staking market. Rocket Pool, StakeWise, Stader Labs, Diva Staking, and Puffer Finance are on board with this progressive move. But why this specific figure? Moreover, why now?

Breaking Down the 22% Limit and Its Significance

Interestingly, Superphiz, a renowned Ethereum core developer, provided an illuminating perspective on the chosen limit. Significantly, he highlighted that with 66% of validators needing consensus on the Ethereum state, a cap below 22% ensures that at least four major entities must agree for chain finalization. Essentially, finality is when transactions on a blockchain become immutable, reinforcing the integrity of the chain.

Hence, this move champions decentralization and secures the blockchain against potential manipulations. The proposition came to light in May 2022 when Superphiz pondered if staking pools would prioritize the chain’s health over profits.

However, not all are in agreement. Surprisingly, Lido Finance, the most dominant entity in Ethereum’s liquid staking domain, opted against self-limitation. With a staggering 32.4% of all staked Ether, their influence is undeniable, far surpassing their closest competitor, Coinbase, which accounts for 8.7%.

Community Divisions: A Balance Between Innovation and Control

Additionally, the Ethereum community appears split on the issue. Some, like “Mippo”, assert that the self-limit proposal doesn’t resonate with the principles of Ethereum. They argue that those pushing for it might not be so inclined if they dominated like Lido. Conversely, some staunch critics view Lido’s massive share as detrimental to the broader goal of decentralization.

So, as the Ethereum landscape evolves, this self-imposed limit becomes a touchstone for discussions on centralization, profit, and the ethos of blockchain technology. Will more entities follow suit? Only time will tell. But one thing’s sure: the quest for a more decentralized Ethereum is afoot.

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