Several Ethereum liquid staking providers are taking steps to uphold decentralization by imposing a self-imposed cap of 22% on their share of the Ethereum staking market.
This strategic move aims to prevent any single entity from gaining too much control over the network.
Among the providers embracing or considering this self-limitation approach are Rocket Pool, StakeWise, Stader Labs, Diva Staking, and Puffer Finance.
Ethereum core developer Superphiz reported these commitments. Puffer Finance, a liquid staking service, also declared its dedication to the self-imposed cap.
Notably, Rocket Pool, StakeWise, Stader Labs, and Diva Staking are actively engaged in committing to this limitation.
The motivation behind setting the cap at 22% is linked to Ethereum’s consensus mechanism, which requires 66% agreement among validators to establish the state of the network.
By capping at 22%, the goal is to ensure that at least four significant entities must conspire in order to influence the finalization of transactions on the blockchain.
Finality signifies the point at which transactions become unalterable within a block.
Superphiz introduced this concept in May 2022, raising questions about whether staking pools would prioritize the network’s well-being over their profits.
Notably, Lido Finance, the largest Ethereum liquid staking provider, did not align with the proposal, voting with a 99.81% majority against self-imposed limitations in June.
Lido Finance currently dominates the Ethereum staking market, controlling 32.4% of staked Ether, in contrast to Coinbase, which holds only an 8.7% market share.
Data from Dune Analytics illustrates the distribution of Ethereum stakers by staking amount and market share, with Lido being the sole entity above the 22% threshold.
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Industry commentators have offered differing perspectives. Some, like “Mippo,” argue that the self-limitation proposal doesn’t concern Ethereum’s alignment principle.
Mippo claims that those pushing for this proposal wouldn’t adopt the same stance if they were in Lido’s position. In their view, these actions reflect rational economic decisions based on market dynamics.
Another observer urges the Ethereum community not to label more user-friendly solutions as greedy products.
Yet, some express apprehensions about potential centralization risks, criticizing Lido’s substantial market share dominance as “disgusting and selfish.”
In summary, multiple Ethereum liquid staking providers are embracing or considering a self-imposed cap of 22% on their Ethereum staking market share.
This initiative aims to maintain decentralization and prevent any single entity from gaining excessive control over the network.
The rationale behind the 22% cap is tied to Ethereum’s consensus mechanism, which necessitates agreement among validators for network state confirmation.
While some observers view these actions as economically rational, others express concerns about centralization and dominance within the market.
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