Prominent crypto exchange Coinbase has made waves in the Ethereum (ETH) staking market, emerging as the second-largest staking entity after Lido DAO. This recent development has caused some concerns about network centralization, especially given Lido’s dominance in the ETH staking sphere. According to a report by Chinese reporter Colin Wu, Coinbase currently holds an impressive 3.873 million staked ETH, which accounts for 14.1% of all staked ETH in the market.
Lido DAO, a popular liquid staking platform, still holds the top spot in the ETH staking space, with one-third of all staked ETH under its control. However, Coinbase’s growing dominance cannot be overlooked. Other platforms that also have a considerable stake in the market include Binance and Kraken exchanges, with a 4.2% and 3.0% market share respectively. The Figment staking pool follows closely in third place with a 4.9% market dominance.
Coinbase’s rise in the ETH staking market is further highlighted by its 44% increase in staking activity over the past six months. This surge coincides with the period of the Ethereum Shanghai upgrade, which has been active in recent months. Contrary to fears that this upgrade may lead to a decline in staked ETH due to the ability to withdraw assets, the Shanghai upgrade has instilled confidence among stakers. As a result, there has been a net positive flow of 7.84 million ETH since the upgrade’s implementation in April. Presently, the total amount of staked ETH stands at 27.42 million ETH, representing 22.81% of ETH’s circulating supply.
While Coinbase’s dominance is certainly impressive, there are concerns within the community about the centralization aspect of Lido DAO’s ETH staking dominance. In a Proof-of-Stake (PoS) consensus model, a higher amount of staked ETH translates to a greater voting power during governance processes. According to data from Dune Analytics, Lido currently accounts for a significant 8.80 million staked ETH, representing 32.11% of the ETH staking market. Interestingly, Lido has experienced a 55% rise in staking activity over the past six months.
These concerns about centralization are not unfounded. Ethereum’s official blog has highlighted the potential risks of a validator controlling a minimum of 33% of staked ETH. In such a scenario, the network could be prevented from finalizing any block, even with a 66% majority. Additionally, if a validator were to acquire 55% of the staked ETH, they could theoretically split the Ethereum chain into two forks. However, it is important to note that these speculations are purely theoretical, and there is currently no evidence to suggest that Lido DAO has any malicious intentions towards the Ethereum network.
At the time of writing, ETH is trading at $1,620.18 with a 1.36% decline in the last day, as per data from CoinMarketCap. The token’s daily trading volume has also decreased by 36.41%, currently valued at $2.86 billion.
Coinbase’s emergence as the second-largest ETH staking entity has raised concerns about network centralization, particularly in light of Lido DAO’s dominance. As the Ethereum network continues to evolve and adapt, it is crucial to strike a balance between decentralization and the benefits that staking platforms provide. Only time will tell how this market dynamic will unfold and impact the future of ETH staking.
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