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Ethereum Staking Providers Set 22% Limit to Ensure Decentralization

22% self-limit rule is based on the idea that for Ethereum to achieve finality.

by Alexander
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Several Ethereum liquid staking providers, including Rocket Pool, StakeWise, Stader Labs, Diva Staking, and Puffer Finance, have either implemented or are planning to implement a self-imposed limit, capping their ownership of the Ethereum staking market at 22%. This move aims to safeguard the decentralization of the Ethereum network.

The 22% self-limit rule is based on the idea that for Ethereum to achieve finality, which ensures the immutability of transactions, at least 66% of validators must agree on the network’s state. By setting the limit below 22%, the requirement for at least four major entities to collude in order to impact the network’s finalization is established.

Divergent Views in the Ethereum Community

The Ethereum community is divided in its response to the self-limit proposal. Some argue that it has nothing to do with Ethereum’s alignment principles, suggesting that those advocating for the proposal might not do so if they were in Lido Finance’s dominant position.

Votes casted from Lido (LDO) token holders on the self-limiting proposal. Source: Snapshot

Balancing User-Friendly Solutions and Decentralization

Others believe that user-friendly solutions should not be criticized as greedy products, emphasizing the need to address potential centralization issues posed by Lido Finance’s market share dominance, which currently stands at 32.4% of all staked Ether.

In the ongoing discourse, the Ethereum community grapples with how best to ensure decentralization while accommodating various stakeholders’ perspectives.

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