As the Ethereum merger moves closer to a liquid staking solution, Lido has published an article outlining its goal of further decentralization.
Lido is a liquid staking service with over $10 billion ETH locked up on its platform, making it the market leader in the liquid staking industry.
Nobody may become a node operator
The platform has become aware of its position, as it seeks to begin exploring a mechanism that would allow anyone to become a validator at Lido without permission. Lido currently chooses its validators through peer review only, where users can apply to become a node operator. To solve this problem, he proposed using distributed validation technology, which combines validators into independent committees that collectively propose and witness blockages, reducing the possibility of individual bad actors.
He believes he will be able to minimize these dangers by allowing anyone to become a node operator. It also plans to implement a scoring system to encourage validators to perform well. Longer timelines and granting veto powers to a quorum of stETH holders are two other ways to improve governance. This is important because it permanently allows holders of staked ETH to stop decisions made by Lido governance holders.
What is the Lido?
Lido is a liquid staking solution that lowers barriers to entry for users who want to stake their ETH. Instead of staking ETH in multiples of 32, users can stake a fraction of ETH. While this allows users to earn a reward for their ETH, it also solves the illiquidity of their staked ETH, as it issues Lido’s stETH. This is the tokenized version of Staked ETH, which can be used in other DeFi protocols to earn returns in addition to staking rewards, for example by lending your stETH to other users.
As the Ethereum merger is expected to take place in 2022, many people are interested in Lido. In March, Andreessen Horowitz (a16z), a venture capital firm, invested $70 million in Lido Finance. The interest is understandable, given that Lido’s main competitor, RocketPool, now has a TVL of $600 million. Still, Lido has a TVL of $10 billion on ETH and a total TVL of $17.38 billion, making it difficult for competitors to increase their market share.