Lido, the leading liquid staking solution for Ether (ETH) stakers, has seen a decline in its market share from 32% to 29.57% in December 2023. This decrease in market share has alleviated concerns about Lido’s growing dominance in the ecosystem.
Lido’s popularity in ETH staking, combined with the lack of competition in the space, allowed the platform to capture the majority of the ETH staking market. However, the community was worried that any entity with over 33% market share could have undue influence over the Ethereum blockchain.
Recent data from crypto analytics platform Dune on April 4 shows that Lido’s market share for staked ETH has dropped below 30%. Other notable contributors to the ETH staking ecosystem include Coinbase with a 14.04% market share, Binance with 3.75%, and Kiln with 3.5%.
Interestingly, the second-largest entity in ETH staking is listed as “unidentified,” accounting for 16.9% of the market. In total, there are 26 known entities that participate in ETH staking, including Kraken, Bitcoin Suisse, OKX, and Upbit.
Ethereum co-founder Vitalik Buterin has emphasized that stake pools should not exceed 15% control and should adjust their fee rates accordingly. This recommendation aims to maintain a healthy level of decentralization in the staking ecosystem.
The Lido decentralized autonomous organization (DAO) community previously attempted to address the issue of ETH staking dominance by proposing a hard limit in May 2022. However, the proposal was rejected by the DAO with a 99.81% vote in June 2022.
The introduction of increased competition among ETH staking service providers is expected to further decentralize the staking ecosystem.
In a recent report by Coinbase, analysts highlighted potential risks associated with Ether restaking and the issuance of liquid restaking tokens (LRTs). These tokens, such as those offered by the Ethereum restaking protocol Eigenlayer, can increase earnings but also compound risks by allocating funds to similar validators for higher yield. The analysts cautioned that maximizing yields for LRTs could come at the expense of a higher, albeit hidden, risk profile.
Overall, the ETH staking landscape is evolving, and efforts are being made to ensure a more decentralized and secure ecosystem.