2023-10-07 12:33:52
After the Ethereum merger, “The Merge” and the Shanghai updates, the amount of ether staking increased significantly. This, in turn, raises concerns about the centralization of the network and the generally obtainable staking profits, according to JPMorgan’s analysis published a few days ago. Despite the existence of decentralized alternatives such as Lido’s liquid staking platform, centralization is a serious threat to the security of the network when it comes to Ethereum. Ethereum’s current staking situation poses a serious threat. Everyone used to sing odes about the Lido platform. After all, it was a better alternative to centralized liquid staking platforms that were tied to centralized exchanges. Lido tried to achieve its decentralization goals by dividing the staked ETH between several node operators. However, despite this, the risk of centralization remained. A very small number of liquidity providers or node operators represent the risk, who can become victims of any attack or even cooperate with each other to the detriment of the community. With liquid staking, the risk of multiple staking also appeared. Liquidity tokens are then used as escrow in a wide variety of DeFi protocols. This means that if the value of a staked asset falls significantly or it is attacked in some way, the collapses can come like dominoes. In addition, the increase in staking activity has removed the attraction that ether had in terms of dividend and interest payments. Especially when compared to the rising interest rates of traditional financial instruments. Ethereum’s total staking rate dropped from 7.3% before the Shanghai update to 5.5%. Meanwhile, the interest rate on the 2-year American government bond has risen above 5%, and in Hungary there is no need to present the super government bond and its assumed interest rates. Currently, Lido is the largest centralized staking service provider, where they already manage 8.9 million ethers out of the 30.7 million ethers committed in the network’s staking contract. A centralized staking provider is needed because technically anyone can stake, in fact 32 ETH is needed to set up a staking node. Those who do not have this amount can only enter the ETH staking market through a centralized staking service provider.
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