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Breaking News: SOL Strategies: The First Solana Treasury Company Listed On Nasdaq

Lido Centralization Risks On Ethereum Raises Concerns: Will LDO Crash?

Dalmas Ngetich
Dalmas Ngetich
2 years ago
3 mins read
Lido Centralization Concerns on Ethereum

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Lido, the liquidity staking protocol that supports staking, is now under some of the Ethereum community members’ crosshair. There are fears that the platform is centralizing Ethereum and could make the blockchain fragile.

As of June 1, Lido is the largest decentralized finance protocol. DeFiLlama data shows that the platform manages $13.2 billion  in staked assets. 

At this level, Lido has nearly twice the total value locked (TVL) as in MakerDAO, one of the original decentralized money markets in the sphere. 

MakerDAO has $6.29 billion in TVL and only serves Ethereum.

Lido Is Ethereum’s Weak Point?

Concern from critics is not only about the dominance of Lido in terms of TVL but the number of validators using the protocol. 

According to on-chain data, over 19 million Ethereum has been staked in the Beacon Chain, that is, the proof-of-stake network. 

However, out of this amount, 6 million Ethereum has been staked through Lido. This translates to roughly 36% of all staked Ethereum passing through the liquidity staking protocol.

Moreover, parallel data shows that 32% of all Ethereum validators use Lido infrastructure. 

In Ethereum’s proof-of-stake system, validators are needed to verify transactions and secure the network against external attacks. 

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The distribution of validators, who now don’t have to run energy-consuming and expensive rigs, is critical for decentralizing the Ethereum network. 

Global distribution of Ethereum validators would translate to a robust platform where users and operators of protocols, presently managing over $26 billion of assets, don’t have to worry about a majority attack.

It is this level of centralization that is emerging in Lido that some Ethereum community members are concerned could destabilize the network. 

In the past, Prysm, a client operator, lost a significant portion of its market share when it was discovered that over 66% of all Ethereum proof-of-work nodes were using their software.

Could this same intervention be require to suppress Lido’s expansion?

According to the critics, the current community is lacking in educational material and initiative to address problems as they emerge.

Thus far, with 32% of all validators using LidoDAO infrastructure, it is more than twice the limit Vitalik Buterin, the co-founder of Ethereum, had recommended for every entity wishing to host the network’s validators. 

LDO Prices Could Drop

With centralization questions emerging, LidoDAO could be forced to decentralized, even by breaking down into multiple entities.

However, for LDO holders, any action to break up the protocol’s dominance could have a drastic effect on prices.

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As of June 1, LDO, the governance token of LDO, is one of the top performers.

Lido Price On June 1| Source: LDOUSDT On Binance, TradingView
Lido Price On June 1| Source: LDOUSDT On Binance, TradingView

From December 2022 lows, LDO has rallied 125% to spot rates, as more ETH holders opted to stake through Lido Finance infrastructure to earn annual rewards from the Ethereum proof-of-stake network.

Feature Image From Canva, Chart From TradingView
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Dalmas Ngetich
Dalmas Ngetich

Dalmas Ngetich

Dalmas, a seasoned crypto reporter, brings a unique perspective to the industry. His specialization in NFTs, blockchain, DeFi, and blockchain news for NewsBTC, combined with a background in mechanical engineering and over a decade of experience in journalism, has allowed him to craft over 10,000 news and feature articles over the past eight years. His diverse range of topics, including technology, Forex, and finance, reflects his comprehensive understanding of the crypto landscape.

Read more

His technical expertise and analytical skills have been recognized and featured by leading news outlets such as Investing.com, CoinTelegraph, Entrepreneur, Forbes, and other authority sites. Notably, he broke key news, including the Ripple and MoneyGram partnership, cementing his position as a thought leader in crypto.
The news exploded. Over 100,000 people devoured this meticulously crafted report, from seasoned investors to curious newcomers. His analysis wasn't just dry facts and figures; it crackled with insight, dissecting the implications of the partnership and its potential impact on the future of finance.

His deep understanding of the financial markets, technological advancements, and blockchain developments has made him a respected voice in the industry.

Dalmas is also the founder of BTC-Pulse, a crypto news site, further demonstrating his commitment to the field. He firmly believes that DeFi and NFTs are here to stay and will continue to drive financial inclusion.

Coming from Nairobi, Kenya, it is easy to see the source of his inspiration: Across Africa, millions lack access to traditional banks. Remote villages, limited documentation, and high minimum balances create insurmountable barriers.

DeFi, not just Maker or Aave, for example, but think of Bitcoin and USDT, cuts out the middleman. Forget banks with their limitations.
Even so, DeFi isn't a magic solution. The continent still struggles with reliable internet access, and educational campaigns highlighting the benefits of this wonderful solution are insufficient. Moreover, even for those interested, understanding DeFi can look like learning a new language.

Dalmas is here to help make the tech easy to understand and digestible, even for beginners.
The story of DeFi in Africa is still being written. Challenges abound, but the promise of a more inclusive financial future is a powerful motivator. With innovation and collaboration, Dalmas firmly believes that DeFi could become the key to unlocking Africa's full economic potential.
This possibility and its immense value motivate Dalmas to continue breaking key DeFi innovations and more across the globe. His engineering background further enhances his ability to deliver well-thought-out pieces that blend technical insight with clear, impactful reporting.

Beyond his professional achievements, Dalmas is deeply passionate about technology and politics. Policies drive adoption, and being at the forefront and keeping up with how they evolve is crucial for the sphere to mature.

When Dalmas is not closely monitoring the latest crypto events, he can be found in nature, exploring the picturesque countryside, and traveling with his family and friends. His love for adventure and discovery perfectly complements his investigative and reporting skills.
You can connect with Dalmas on X: @Dalmas_Ngetich, or contact him on Telegram @Dalmas_Ngetich.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
The highest standards in reporting and publishing
How Our News is Made

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