Thank you Vasily and Sacha, and everyone else who has provided inputs thus far. This is an important topic not just for Lido, but for Ethereum community as a whole. And, the decision here will be a reference for many other organisations now and into the future. So it is important to arrive at the right decision.
I’d like to argue that Lido should not limit new Eth staked through the protocol. I base this argument on the following points:
- As of 1st June ’22 Lido has over 32% of total staked Eth. While Lido has a significant share of the total staked Eth, there are many new and re-emerging competitors in Liquid Staking market such as Stakewise, Ankr, PStake etc. which is a good sign.
- New competitors and existing competitors must work hard to gain trust and goodwill of stakers. Competing protocols receiving more Eth just because Lido is limiting its intake, is not a good outcome for the network as it doesn’t encourage high performance.
- The growth of Lido should encourage more providers to offer attractive, decentralised liquid staking solutions of their own. Success should encourage positive competition in this instance. With only 12% total Eth staked, there is a significant unmet or underserved Eth holders to attract. Lido even offers a good blue-print for other Liquid staking protocols to innovate upon.
- When withdrawals are enabled, the staked Eth could be withdrawn and staked with any provider of choice based on who offers the best value to the staker (individual and institutional). This will reduce the appeal of liquid staking protocols and create more even playing field. This also means that the period of risk (on this factor alone) to the network is limited to between now and when withdrawals are enabled. If this really matters, then it should act as a motivation to accelerate work on withdrawals post merge.
- Success of Lido and any other staking provider rests on continued improvement and health of the network. Any possible operator collusion, or governance capture will erode trust dramatically, damaging future returns of that staking service – making it non-attractive. This must be addressed with the governance improvements identified by Lido.
I rather encourage more liquid staking protocols to innovate and compete fairly for staked Eth, without Lido having to limit its intake.
If the eventual decision happens to be to “limit”, I strongly recommend that this is done dynamically i.e. Lido must be able to remove any such limits instantly if other entities happen to ignore these boundary conditions.