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Ethereum Staking Services Commit to 22% Validator Limit to Safeguard Decentralization

by Dan K
Sep 1, 2023 - 1:00 pm
in Ethereum
Representatives from major Ethereum staking services in a meeting discussing the 22% validator limit for decentralization.

A Move Towards Decentralization

At least five Ethereum liquid staking providers are making strides towards decentralization by imposing a self-limit rule. They have vowed not to hold more than 22% of the Ethereum staking market share.

Notable Commitments

Among those who have made the commitment or are in the process include major players like Rocket Pool, StakeWise, Stader Labs, and Diva Staking, as confirmed by Ethereum core developer, Superphiz. Additionally, Puffer Finance, another significant player in the liquid staking arena, has also announced its pledge to this limit.

The Rationale Behind 22%

The genesis of this self-limit is quite strategic. Superphiz elucidated that as 66% of validators are required to achieve consensus on Ethereum’s state, keeping the threshold below 22% ensures that no fewer than four principal entities would need to collude for the chain to finalize. In blockchain terminology, “finality” is when transactions are rendered immutable, effectively preventing any modifications to the block’s transactions.

Historical Context

The idea was initially mooted by Superphiz in May 2022. He pondered whether staking pools would prioritize the health of the Ethereum chain over their financial gains.

Lido Finance’s Stand

However, not all have been receptive to this idea. Lido Finance, the largest Ethereum liquid staking provider, overwhelmingly decided against this self-limit in June, with a whopping 99.81% majority. Currently, Lido holds a staggering 32.4% of the staked Ether, in stark contrast to its closest competitor, Coinbase, which has just 8.7%.

Mixed Feedback from the Ethereum Community

Opinions are split within the Ethereum community. While some like “Mippo” argue that the proposal isn’t about “Ethereum alignment” and that most entities would act in their best economic interest, others decry the potential for centralization. Certain voices within the community have gone as far as to label Lido’s dominant market share as “disgusting and selfish.”

This move towards self-limitation and its implications will be closely watched as Ethereum continues its journey in the world of decentralized finance and blockchain.

Tags: DecentralizedEthereumStaking
Dan K

Dan K

Dan K, the chief editor, is a visionary wordsmith, shaping narratives with finesse. His discerning eye for detail creates literary masterpieces.

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