Just-In: Lido Community Opposes To Limit Ethereum Staking, Here’s Why

The Lido community has voted to against the governance proposal limiting Ethereum staking on the Lido liquid staking protocol. The proposal has received 99% votes in opposition to self-limiting the percentage of Ethereum that can be staked.

Lido Community Votes Against Proposal to Limit Ethereum Staking

The Lido community is currently voting on the governance proposal “Should Lido consider self-limiting?” after several Ethereum developers including Vitalik Buterin, Superphiz, and Danny Ryan claimed that no single staking protocol should have a majority in staking Ethereum.

The proposal is open for voting from June 24-July 1, but the current voting shows majority opposes the proposal to limit the amount of Ethereum staking on Lido. Almost 99.81% of people have voted “no, don’t self-limit” while only 0.19% of people have voted “yes, let’s self-limit.”

The vote will help determine the growth of a protocol in Ethereum’s proof-of-stake chain and decentralized governance. A successful vote would have bound the protocol to “decreasing inbound stake flow in any shape, form or severity.” As per the current voting, the team will not continue working further until questions are raised against the protocol.

As per Dune Analytics, Lido currently accounts for a 31.63% market share with 4.126 million Ethereum staked. Followed by Kraken at only 6.4% market share.

Lido aims to provide access to staking and prevent centralized exchanges to gain the majority share of staked Ethereum. Moreover, other liquidity staking platforms may not be able to grow and meet demand, which poses liquidity risks.

Risks to the Ethereum Merge

Ethereum experts believe Lido’s dominance is a serious concern for the Merge. The ETH staked on Lido is added to the Beacon Chain. Following the merge, all Ethereum will be moved to the Beacon Chain. Thus, poses a systemic risk to the Merge.

Danny Ryan, a researcher at Ethereum Foundation, believes Lido’s dominant staking position could pose risks to the decentralized model of the Ethereum network and lead to attacks.