Cryptocurrency

Lido Proposes Limit On Ethereum Staking, Here’s Why

Lido Proposes Limit On Ethereum Staking, Here’s Why #Lido #Proposes #Limit #Ethereum #Staking #Heres Welcome to JibGlobe, here is the new resources we have for you today:

DeFi platform Lido on Friday proposed a limit on the platform’s share of staked Ethereum, citing a potential systematic risk from the token, among other factors.

In a governance proposal put forward on Friday, the fifth-largest DeFi protocol said that multiple prominent Ethereum developers, including co-founder Vitalik Buterin, have argued that no single protocol should have a majority in staking ETH.

Voting on the proposal has not opened yet. Lido wants to first establish whether a limit on staking would be desirable, and to what extent the limit should be placed.

The proposal comes a few weeks after a sharp fall in Lido Staked Ethereum (stETH) caused mass liquidations in the market. The fall caused a divergence in stETH and ETH prices, which could complicate the upcoming merge.

Lido is by far the biggest provider of liquid staked Ethereum, which is a tradeable class of token that represents staked ETH. stETH- its main product- can be redeemed for ETH once the merge goes live.

The argument for limiting Ethereum staking

In its proposal, Lido argues that the saturation of staked Ethereum towards one protocol poses an existential threat to the blockchain, given that it would give the protocol more voting power.

It also argued that limiting staking would be done on good faith that other liquid staking protocols would also limit their exposure. This would also allow newcomers, such as the recently launched Rocket Pool, to rise to meet the supply shortfall.

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