Ethereum staking service providers agree to implement a 22% limit for all validators.

Author: Brayden Lindrea, Cointelegraph; Translation: Song Xue, LianGuai

At least five Ethereum liquidity providers have implemented or are working to implement self-imposed restrictions, pledging not to own more than 22% of the Ethereum staking market – a measure seen as ensuring the decentralization of the Ethereum network.

According to Superphiz, a core developer of Ethereum, Ethereum staking providers who have committed or are committed to complying with self-imposed restrictions include Rocket Pool, StakeWise, Stader Labs, and Diva Stake.

Another liquidity staking service company, Puffer Finance, has also announced its commitment to self-imposed restrictions.

This proposal may be aimed at addressing concerns about the increasing centralization of Ethereum staking.

As for why a 22% self-imposed limit is proposed, Superphiz explains that because 66% of validators need to reach consensus on the state of Ethereum, setting the limit below 22% means that at least four major entities must reach consensus.

Finality refers to the notion that transactions on a blockchain are considered immutable, supposedly ensuring that transactions within a block cannot be altered.

This idea was proposed by Superphiz in May 2022, when he questioned whether staking pools would be willing to prioritize the robust development of the chain over their own profits.

Interestingly, Lido Finance, the largest Ethereum liquidity staking provider, voted against self-imposed restrictions with a majority of 99.81% in June.

Superphiz stated in a post on August 31, “They have expressed their intention to control the majority of validators on the beacon chain.”

Voting on the self-imposed restrictions proposal by Lido (LDO) token holders. Source: Snapshot

According to data from Dune Analytics, Lido currently dominates the Ethereum staking market, accounting for 32.4% of all staked Ethereum, while Coinbase only accounts for 8.7% of the market.

Ethereum stakers divided by stake amount and market share, Lido is the only institution above the 22% threshold. Data source: Dune Analytics

Who is right? Mixed reactions from the Ethereum community

An industry expert, “Mippo,” explained on August 31 that the self-imposed restrictions proposal has nothing to do with “Ethereum consensus” – a principle understood as achieving trusted neutrality and permissionless innovation on Ethereum.

Mippo claims that if those trying to push the proposal were in a bullish position, they would not make way.

“Here, everyone is doing economically selfish and rational things,” Mippo concluded.

Another observer said, “People in the ETH community should not view more user-friendly solutions as greedy products.”

However, others are more wary of the current potential centralization issues, calling Lido’s dominant market share “disgusting and selfish.”

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