Lido community proposes limiting protocol share in Ethereum 2.0 staking

Lido community proposes limiting protocol share in Ethereum 2.0 staking

Lido community proposes to limit protocol share in Ethereum 2.0 staking pool

The decentralized organization behind the development of the Lido Finance project initiated a vote to limit the protocol share in the Ethereum 2.0 staking pool. 

Lido Finance is a service for liquid cryptocurrency staking. The protocol allows you to deposit coins in a relevant contract and receive in return the amount of “derivative” tokens that can be used in DeFi services. In the case of Ethereum, these are stETH tokens. 

The authors of the proposal believe that the dominance of Lido in the Ethereum 2.0 staking pool will create a threat to the security of the blockchain after the so-called “Merge” (The Merge). The dominance of the protocol has been referred to by some analysts, such as Danny Ryan, as a potential point of centralization.

Voting ends July 1st. If Lido DAO accepts the proposal, the authors will initiate another discussion regarding how exactly the developers will limit the participation of the protocol in staking.

In June 2022, the discount on stETH exceeded 5%. At the time of writing, derivative tokens are trading almost 4% below native Ethereum coins (Curve decentralized exchange). 

Recall that CoinShares analysts urged not to compare the situation around stETH with the collapse of the Terra ecosystem. 

Read ForkLog bitcoin news in our Telegram – cryptocurrency news, rates and analytics.