LIDO Community Shows Intent To Keep ETH Staking Uncapped

The LIDO community shows intent to keep ETH staking uncapped as they are voting against the proposal that will limit how much ETH can be staked on the platform so let’s read more today in our latest Ethereum news.

Last week, LIDO put forward a governance proposal to limit the ETH amount that users can stake after facing criticism from the community. Beacon Chain community manager Superphiz tweeted:

“Who will be the first staking provider to publicly commit to limiting themselves to not operating more than 22% of validators on the chain? Who do you want to see step up to the plate and prioritize beacon chain health above profits?”

Lido passing 1/3 is a centralization attack on PoS.

We're bad at assessing tail risk, but staking in Lido at these thresholds has a lot of it.

In blockchain systems, tail risk isn't even necessarily so far fetch. Systems tend to hit edge cases, systems tend to get exploited 1/2

— dannyryan 🧱🔥 (@dannyryan) May 10, 2022

LIDO is a liquid staking service that allows users to deposit assets like Solana, Ethereum, Polygon, and others to earn yields. Whenever users stake these assets they get another staked version of the same token that can be used somewhere else on the market. Lido’s staking service became popular as of late and raised concerns about a large amount of ETH now concentrated in oen pool. Despite the centralization worries, the voting for this proposal has been one-sided with 99% of the community voting against limiting how much ETH Lido can service while less than 0.2% voted in favor of the proposal.

The Lido community shows intent to keep ETH staking uncapped as the concerns came two months before the ETH merge event. The ETH staked on Lido is added to the Ethereum Beacon Chain as a PoS version of the blockchain. After the merge event slated for august, all of ETH will be moved to Beacon Chain and will launch the long-awaited ETH 2.0 upgrade. Various validators stake 12.9 million ETH on the Ethereum Beacon Chain and Lido accounts for 31.80% of the total or 4.124 million ETH. After Lido, other bigger depositors include Binance with 6.77%, Kraken with 8.53%, and Staked.us with 3.02%. Ethereum co-creator Vitalik Buterin added:

“Speculative controversial take: we should legitimize price gouging by top stake pool providers. Like, if a stake pool controls [more than] 15%, it should be accepted and even expected for the pool to keep increasing its fee rate until it goes back below 15%.”

Lido’s dominant staking position can pose risks to the DEFI model of the network and lead to attacks as per Danny Ryan, a researcher at the ETH Foundation:

“Lido passing 1/3 is a centralization attack on PoS. We’re bad at assessing tail risk, but staking in Lido at these thresholds has a lot of it.”

Lido was started with two simple aims, to democratize access to staking and to prevent centralized exchanges from getting the bigger chunk of the staked Ethereum. The current PoW consensus models all have these threats but the need for high computation resources safeguards the networks.