Reasoning For Blockworks Advisory’s Vote On 180
We approve the integration of the Community Staking Module (CSM). The extrinsic risk liquid staking providers pose to Ethereum is relative to the quality of the validator set. More specifically, the extent of this risk depends on how fast an LSP can reallocate capital from node operators to a centralized operator. Lido’s vision of a diversified validator set neutralizes the cartelization risk a permissioned validator set presents to Ethereum. As such, we support Lido’s continued alignment with Ethereum by committing to diversifying the validator set with its Distributed Validator Technology module (DVT), exit priority limits, and now the CSM.
The Community Staking Module holds a competitive advantage in the solo-staking market with its 1.4 ETH minimum bond and higher less-volatile staking rewards (in part due to the dual reward structure of the CSM). The novel implementation of the Staking Router enables an equitable distribution of rewards despite the expected relative quality of CSM node operators (NO) being less than the Curated Module. By layering equitable rewards across modules with a performance threshold mechanism upholding a meritocratic self-elected validator set, a positive form of liberal welfare elevates the quality of the CSM validator set.
In line with our former opinion, we believe that version 2 of the Staking router is an integral aspect for the proper functioning of the CSM. By updating the Deposit Security Module (DSM), Validator Exit Bus Oracle (VEBO), Accounting Oracle (AO), and reward distribution mechanism, the curate module will be streamlined, validator exits will be proactively prioritized, and AOs will be scalable.
Lastly, while the likelihood of a negative stETH rebase is low, the existence of a dedicated fund and the approval of Lido DAO for slashing due to an inactivity leak provides a reassuring safeguard against this unlikely event.