Prominent crypto exchange Coinbase has risen to become the second-largest Ethereum (ETH) staking entity, gaining significant ground in the staking market. This development has raised concerns about network centralization, particularly in relation to the dominance of Lido DAO in ETH staking. According to Chinese reporter Colin Wu, a recent report from Dragonfly data scientist hildobby, utilizing data from Dune Analytics, discloses that Coinbase currently holds 3.873 million staked ETH, accounting for 14.1% of the total staked ETH in the market. While Coinbase’s dominance in the ETH staking sphere is impressive, it falls second to the liquid staking platform, Lido DAO, which controls one-third of all staked ETH. Other platforms have also made their mark, with the Binance and Kraken exchanges holding a significant staking percentage of 4.2% and 3.0%, respectively. Figment staking pool follows closely, boasting a 4.9% market dominance.
A Surge in Coinbase’s ETH Staking
Coinbase experienced a notable 44% increase in ETH staking activity over the past six months. Interestingly, this surge aligns with the period during which the Ethereum Shanghai upgrade took place. There were initial concerns that the upgrade might result in a decline in staked ETH as users would be able to finally withdraw their staked assets. However, the Shanghai upgrade has instilled confidence among stakers, leading to a net positive flow of 7.84 million ETH since its implementation in April. As of now, the total amount of staked ETH stands at 27.42 million, representing 22.81% of ETH’s circulating supply.
There are growing concerns within the crypto community about the centralization of the ETH staking market, particularly in reference to Lido DAO’s dominance. In a Proof-of-Stake consensus model, a higher amount of staked ETH equates to greater voting power during governance processes. Data from Dune Analytics reveals that Lido holds a significant stake of 8.80 million ETH, representing 32.11% of the total ETH staking market. Notably, Lido has witnessed a staggering 55% increase in staking activity over the last six months. Ethereum’s official blog acknowledges the validity of concerns about centralization, explaining that if a validator controls a minimum of 33% of staked ETH, they can potentially prevent the network from finalizing any block, even with a 66% majority. Furthermore, if a validator were to acquire 55% of the staked ETH, they could hypothetically split the Ethereum chain into two forks. It is important to note that these are speculative scenarios, as there is currently no evidence suggesting that Lido DAO has any malicious intentions toward the Ethereum network.
As of now, ETH is trading at $1,620.18, experiencing a 1.36% decline in the past day, according to data from CoinMarketCap. Additionally, the token’s daily trading volume has decreased by 36.41% to $2.86 billion. While ETH’s price and trading volume may fluctuate, the growing interest and participation in staking activities reflect the community’s confidence and commitment to Ethereum’s long-term success.
Coinbase’s emergence as a significant player in the ETH staking market highlights its increasing influence within the crypto ecosystem. However, concerns about centralization persist, particularly regarding Lido DAO’s substantial stake. It is crucial for the Ethereum community and stakeholders to remain vigilant and promote decentralization, ensuring a healthy and resilient network for the future.
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