Ethereum Staking Services Embrace 22% Limit to Uphold Decentralization

In a strategic move to maintain the decentralization of the Ethereum network, several prominent Ethereum staking service providers have rallied behind a self-imposed limit of 22% for their share of the staking market. This initiative aims to ensure that the Ethereum ecosystem remains robust and resilient against centralization risks.

At the forefront of this movement are renowned Ethereum staking platforms such as Rocket Pool, StakeWise, Stader Labs, and Diva Staking, as confirmed by Superphiz, an Ethereum core developer. Puffer Finance, another notable player in the liquid staking domain, has also publicly committed to adhering to the 22% self-limit rule. The rationale behind this move is to address mounting concerns about the concentration of staking power within a few entities.

The proposal’s architect, Superphiz, outlined that the 22% threshold was selected due to the consensus mechanism employed by Ethereum. For a chain to achieve finalization, an agreement among 66% of validators is required. By setting the self-limit at 22%, a collusion of at least four significant entities would be necessary to jeopardize the network’s decentralization.

The concept of “finality” is crucial in the blockchain space, signifying the point where transactions within a block become immutable. The self-limit rule was first introduced by Superphiz in May 2022, questioning whether staking pools would prioritize the chain’s health over their individual profits.

Notably, the largest Ethereum liquid staking provider, Lido Finance, took a divergent path by voting overwhelmingly against self-limitation in June. This decision drew attention due to Lido’s significant share of the Ethereum staking market, currently holding 32.4% of all staked Ether. In contrast, Coinbase, the next largest entity, only commands 8.7% of the market, according to data sourced from Dune Analytics.

An industry observer known as “Mippo” highlighted that the self-limit proposal isn’t directly tied to “Ethereum alignment,” a principle fostering neutrality and permissionless innovation on the Ethereum network. Mippo further indicated that those pushing for the proposal might not be as inclined to support it if they were in Lido’s dominant position.

As the Ethereum community navigates the intricate landscape of decentralization and staking dynamics, the introduction of the 22% self-limit rule emerges as a significant step toward upholding the network’s foundational principles while ensuring an equitable distribution of staking influence. The collaboration among staking service providers underlines their commitment to preserving the decentralized ethos of Ethereum.

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Maria Irene
Maria Irenehttp://ledgerlife.io/
Maria Irene is a multi-faceted journalist with a focus on various domains including Cryptocurrency, NFTs, Real Estate, Energy, and Macroeconomics. With over a year of experience, she has produced an array of video content, news stories, and in-depth analyses. Her journalistic endeavours also involve a detailed exploration of the Australia-India partnership, pinpointing avenues for mutual collaboration. In addition to her work in journalism, Maria crafts easily digestible financial content for a specialised platform, demystifying complex economic theories for the layperson. She holds a strong belief that journalism should go beyond mere reporting; it should instigate meaningful discussions and effect change by spotlighting vital global issues. Committed to enriching public discourse, Maria aims to keep her audience not just well-informed, but also actively engaged across various platforms, encouraging them to partake in crucial global conversations.

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