Should Lido on Ethereum be limited to some fixed % of stake?

Lido should not artificially limit itself.

The rhetoric surrounding this idea continues to come from adversarial stakeholders, individuals who do not understand Lido’s systems, and people who are misinterpreting the genuine concerns of some in the Ethereum community.

Lido certainly has room to improve in:

  • It’s internal decentralization to ensure each staking party has sufficient fail safe and stop gap measures they can introduce in light of a bad actor or exploit.

  • Measures to fairly prevent system price gouging.

  • Processes on the arbitration of (unlikely) system wide voting or dispute resolution among validators.

But, let’s not make the mistake here of thinking that Lido is a centralized staking entity.

Lido arguably isn’t even a staking entity, but instead, a rewards incentive and protocol layer for staking entities to be able to provide staking as a standardized service.

This is why it’s disingenuous to suggest that Lido “controls” XX% of stake when comparing it to entities like Coinbase or Kraken.

Lido is directly aligning the incentives of many parties, whom are normally adversarial, and forcing them to act in the best industry of the protocol as it favors their business long-term to do so.

Further, competition here is paramount. As the Ethereum community the only thing that should matter is the most robust and secure staking that is not owned by a single entity.

Artificially capping Lido would result in benefiting other parties who would not be competitive in their offerings under normal circumstances. I doubt we would see Binance or Coinbase stop their offerings under any circumstance, and if people can’t get more stETH or their is a premium, they’ll go to these other leading entities.

If other parties wish to take marketshare, they should do so by being a competitive standard of product.

I appreciate the seriousness with which Lido is examining the centralization concerns, I think being a market leader in such a critical space does require a great deal of responsibility - and that there is more than can be done in building the right system guard rails.

But Lido’s focus should be on making the best protocol to onboard more staking entities and reducing any potential vectors of misuse through trustless implementations, and not artificially capping itself, which would only help to serve low-quality and centralized offerings.