Why Is Lido Finance “Centralizing” Ethereum? 

by: Yatriinfo.com

Lido Finance, the largest player in Liquid Staking, controls 73.4% of all staked Ethereum ($ETH) on Liquid Staking Derivative (LSD) protocols as of August 2023. 

This significant control over Ethereum's staked assets raises concerns about centralization, primarily because Lido Finance wields substantial voting power within the Ethereum ecosystem. 

Lido Finance is a Liquid Staking Derivative (LSD) protocol that enables users to stake any amount of $ETH without a 32 $ETH minimum requirement, providing them with $stETH tokens representing their stakes and accruing rewards over time. 

Ethereum Founder Danny Ryan has expressed concerns about Lido's centralization, likening it to a VC-owned "cartel" with only three individuals controlling the voting process, making it vulnerable to regulatory intervention. 

The centralization of Lido Finance is seen as potentially compromising the decentralization of Ethereum, as it introduces a centralized component that could impact the finality of the Ethereum blockchain if Lido were to be shut down. 

While Danny Ryan believes that the issue is manageable for now, he emphasizes the importance of addressing centralization concerns early and taking precautions to ensure that Lido's centralization does not become a significant problem for the Ethereum community's vision of a decentralized Web3 world. 

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