Ethereum Price Down 8% Today, Over Half of Staked Ether Controlled by Five Entities
- Lido Finance has staked approximately 4.3 million units of Ethereum (ETH), thereby representing over a third of the total staked ether.
- Cryptocurrency exchanges Coinbase, Kraken, and Binance have a total of approximately 31 percent of total Ether staked.
- According to Buterin, the PoS comes in with several features to help counter frequently known attacks including the 51 percent.
The Ethereum (ETH) network has entered the second day under the proof-of-stake (PoS) consensus algorithm. However, the Ether price has shrunk over 8 percent in the past 24 hours to trade around $1,898.86. A recent report by blockchain analytics firm, Nansen, has outlined that approximately 64 percent of staked Ether is controlled by only five entities. Recall, that the total Ether staked is 14,473,594 units by 427,989 validators.
Out of which, Lido Finance has staked approximately 4.3 million units of ETH, thereby representing over a third of the total staked ether. Cryptocurrency exchanges Coinbase, Kraken, and Binance have a total of approximately 31 percent of total Ether staked.
Hereby raising concerns about how decentralized the Ethereum ecosystem is with the new PoS consensus algorithm. Remember, it only takes 51 percent of the total validators to take control of the Ethereum network.
Decentralization of Ethereum on a Scope
The success of any blockchain is pegged to how well it solves the trilemma challenge. Notably, Vitalik Buterin argued that the blockchain trilemma- which includes security, decentralization, and scalability- must have a balance.
As for decentralization, the Ethereum network has been depending on miners from around the world to secure the network. Furthermore, there are blockchain attacks including the 51 percent and the spawn camping attacks that keep most developers awake. The spawn camping attack is where the attacker targets the chain over and over again with the explicit goal of rendering it useless.
According to Buterin, the PoS comes in with several features to help counter frequently known attacks including the 51 percent.
“For certain kinds of 51% attacks (particularly, reverting finalized blocks), there is a built-in “slashing” mechanism in the proof of stake consensus by which a large portion of the attacker’s stake (and no one else’s stake) can get automatically destroyed,” Buterin noted in one of his blog posts.
Concerns exist, however, on the possibility of Lido finance getting more centralized, which leads to further centralization of the Ethereum network. The Ethereum ecosystem is the second largest by market capitalization after Bitcoin, thereby making its decentralization key to the success of the cryptocurrency market.
For now, should Lido Finance and its cohorts think of making changes on the Ethereum network, nothing stops it from happening. In a worst-case scenario, the few institutional investors that have the highest stake in the Ethereum network could make changes that only benefit themselves.
The ETH network has a market capitalization of approximately $175 billion with the past 24-hour volume at around $20 billion. Major Ethererum competitors include Binance and its smart contract chains, Cardano, Solana, Polkadot, and Algorand among others.
At the moment, no staked Ether can be withdrawn until the Shanghai upgrade scheduled for sometime later next year happens. Notably, it would take around 300 days to withdraw over 13 million ETH staked according to existing network regulations.