Ethereum Staking Services Agree To 22% Limit Of All Validators
By Kapil Rajyaguru
Ethereum liquid staking providers have either agreed or are working to impose a self-limit rule in which they promise not to own more than 22% of the Ethereum staking market. This self-limit move will ensure that the Ethereum network remains decentralized.
For those of you, who are newly initiated into the world of cryptocurrency, this story is a bit technical, so let me simplify it by shedding light on the word staking…
Staking is a way to help secure proof-of-stake (or a consensus mechanism for processing transactions and creating new blocks) in a blockchain network such as Ethereum. Network participants can run a validator node by putting tokens “at stake,” which can then be “slashed” (taken away as a penalty) if the node commits any malicious actions or is unreliable.
If we talk about liquid staking, then Liquid staking is an alternative to locking up a user’s stake: Liquid staking provides all of the benefits of traditional staking services while unlocking the value of staked assets, used as collateral across the DeFi ecosystem.
Remember, staking offers crypto holders a way of putting their digital assets to work and earning passive income without needing to sell them. It is similar to depositing money in banks, which in turn the banks use for lending to others. In return for locking money, you get paid interest.
Similarly, when you stake your digital assets, you lock up the coins in order to participate in running the blockchain and maintaining its security. In exchange for that, you earn rewards calculated in percentage yields. These returns are typically much higher than any interest rate offered by banks. The more money you lock in the bank, the higher the interest you earn. That’s risk-free earning….
Now coming back to the Ethereum staking services agreeing to a 22% limit of all validators… Among the Ethereum staking providers either already committed or are working to commit to the self-limit rule include Rocket Pool, StakeWise, Stader Labs, and Diva Staking, according to Ethereum core developer Superphiz. Puffer Finance, another liquid staking service, also announced its commitment to the self-limit.
The proposal presumably aims to address concerns of Ethereum staking becoming increasingly centralized.
The 22% self-limit rule ensures at least four major staking entities would need to collude in order for the chain to reach finalization.
Ethereum Staking Services Agree To 22% Limit Of All ValidatorsStaking is a way to help secure proof-of-stake in a blockchain networks such as Ethereum
Rocket Pool, StakeWise, Stader Labs, Diva Staking and Puffer Finance are committed to 22% self-limit.
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