Ethereum (ETH) co-founder Vitalik Buterin has recently shared his thoughts on potential changes to Ethereum’s staking system. In a recent blog post, Buterin discussed various protocols and explored the trade-offs associated with incorporating them into Ethereum’s code. The goal behind the article was to identify possible targets where certain features in the protocol might be worth considering.
Incorporating Protocols
Buterin expressed a stronger inclination towards incorporating certain protocols, such as ERC-4337, while being more cautious about others, like private mempools. ERC-4337 is a token standard that introduces account abstraction without changes to the underlying Ethereum protocol. Private mempools, on the other hand, keep users’ transactions encrypted until they are irreversibly accepted into a block. Each of these protocols presents complex trade-offs that will continue to evolve over time.
Addressing Concerns
One concern Buterin mentioned was the concentration of power among Ethereum’s liquid staking providers. Lido, a prominent liquid staking pool, currently controls over 32% of the staked ether on Ethereum. Buterin highlighted the need for more robust safety mechanisms and proposed exploring additional solutions to enhance the safety and decentralization of liquid staking. This could involve refining existing approaches or granting enhanced governance rights to a randomly sampled committee of small stakeholders.
Several prominent liquid staking providers have implemented or are in the process of implementing a self-limit rule to maintain the decentralized nature of Ethereum. This rule ensures that these providers will not own more than 22% of the Ethereum staking market, addressing concerns over centralization. However, Lido Finance has decided not to commit to the self-limit rule, opting for growth without restrictions.
Coinbase, the second-largest staking provider, holds only an 8.7% market share, according to data from Dune Analytics.
