Thread by @jerome_wong99

According to @DuneAnalytics, @LidoFinance accounts for nearly a third of all #ETH currently staked. Does this pose a centralization risk for @ethereum?

1) Advantages of @LidoFinance

How did @LidoFinance grow so fast and become the dominant force in the #eth staking? The answer lies in the good liquidity of #stETH in #DeFi protocols such as @CurveFinance, @AaveAave, and @MakerDAO.

#stETH is a tokenized deposit of staking that can be freely held, traded or sold. Its amount equals to the total amount of staked #ETH plus the total staking rewards and minus service fees.

The better the liquidity of #stETH, the lower the opportunity cost for users to stake, which facilitates more #ETH being staked in @LidoFinance and increases the liquidity of #stETH again, forming a virtuous circle.

Additionally, as @LidoFinance's staking scale continues to grow, so does their ability to generate rewards.

2) Centralization of #LDO

The governance token of @LidoFinance is #LDO. #LDO can be used to vote on protocol parameters and manage the ever-growing Lido #DAO treasury.

However, a juicy amount of 75% #LDO is allocated to the founding team, early investors and developers. Besides, the data on @etherscan shows that there are currently 26,358 #LDO holders, but the top 100 holders have 90.62% of the total #LDO.

The monopoly of #LDO is bound to exert a negative effect on the governance of Lido #DAO. Now @LidoFinance is considering a dual-governance model of #LDO and #stETH, where #LDO remains the governance token of @LidoFinance, but #stETH holders are entitled with some veto power.

3)  Operation node of @LidoFinance
 
At present, @LidoFinance has 29 different node operators. However, we got some problems here.

First, to become a node operator of @LidoFinance, you need to undergo a review from Lido #DAO, while the monopoly of #LDO casts a shadow over the governance of Lido #DAO. Moreover, the current node operators of @LidoFinance are mainly concentrated in Europe and the US.

@LidoFinance has acknowledged this flaw and is working to improve by building a nodes system with compliant and geographical decentralization.

4)  Conclusion
 
Blockspace is a critical and valuable resource in public #blockchains, and whoever produces block space can reorder or censor transactions.

Therefore, we need a fully decentralized system to ensure the security of the current and future @ethereum #blockchain, and to ensure that blockspace is not monopolized by a single or a few entities.