Ethereum Staking Pools Reach Consensus On 22% Ownership Limit

A cohort of Ethereum staking providers has concurred on a self-imposed limitation, vowing never to possess more than 22% of all staked Ether (ETH), in a bid to thwart the growing concerns of centralization within the Ethereum network.

Providers that have committed (or are currently in the process of committing) to the self-limit rule include Rocket Pool, StakeWise, Stader Labs, Diva Staking, and Puffer Finance, according to Ethereum core developer Superphiz. Data from Snapshot provides statistics and vote configurations on the proposal.

The move aims to address fears that Ethereum staking could become increasingly centralized, diluting the decentralized ethos inherent in blockchain technology. The 22% threshold is not arbitrary. Superphiz, who initially proposed the idea in May 2022, noted that because 66% of validators must reach consensus for Ethereum’s blockchain to achieve finality, a limit of 22% ensures that no fewer than four major entities would have to collude to influence the state of the blockchain. Finality is the point at which transactions on a blockchain are irrevocable, solidifying the contents of a block.

Notably, however, this accord comes from across a polarizing backdrop. Lido Finance, the largest Ethereum liquid staking provider, opted against any self-limitation.

Dominating 32.4% of all staked Ether, Lido vastly outweighs its nearest competitor, Coinbase, which holds an 8.7% market share, based on aggregated blockchain data. This significant stake elicited concerns about the potential for undue influence over the Ethereum network.

Reactions within the Ethereum community are mixed. Critics like Mippo of Blockworks have described Lido’s stance as not being in alignment with Ethereum’s principles of credible neutrality and permissionless innovation, while others argue that the other providers are economically motivated, and would not self-limit if they dominated the market as Lido does at the moment.

This voluntary 22% limitation by some Ethereum staking pools represents an effort to maintain the network’s decentralization, while also opening the factor of whether such a decision was motivated based on the voting organization’s current dominance (or lack thereof) in the liquid staking market.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.