Arman Shirinyan
The largest Ethereum holder out there isn’t as decentralized as you might think
contents
- Lido’s “decentralized model”
- Lidos staked ETH is causing turbulence in the market
The Ethereum merge was the largest and most fundamental update to Ethereum in the history of the network. However, the network’s decentralization may have taken a hit considering the suspicious ownership distribution and the questionable nature of the largest Ethereum investor on the market.
Lido’s “decentralized model”
It is no secret that Lido Finance is one of the largest holders of “new” Ethereum, which operates exclusively on the PoS model. But Lido itself has a specific financial model where the staking rewards received from the pool are not sent to the delegators as is.
Source: Lido Blog
Instead, Lido keeps all rewards and instead sends stETH to the delegators, technically making Lido a centralized ETH holder that can later use it without user consent. As Ethereum is burned without stake and the rewards go to one entity, Ethereum’s decentralization is questioned.
Paid out stETH tokens are also not burned, which is another factor in favor of centralization. Unfortunately, users will not be able to take control of their own ETH until staking contract withdrawals are allowed.
To sue
Lidos staked ETH is causing turbulence in the market
Back in June, the market was on the brink of disaster after the staked ETH token started losing parity with spot Ethereum due to liquidity issues and the TerraUSD disaster. Despite having one of the deepest liquidity pools on the market, a relatively modest volume of sales was enough to destroy the value of the token issued by Lido.
The stETH crash can potentially cause greater turmoil in the market than the TerraUSD situation considering how many tokens investors are currently holding.
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