Growing Concerns Over Lido's Dominance in Ethereum Liquid Staking Spark Debate on Best Path Forward

Lido's dominance of Ethereum liquid staking is a growing concern for some in the crypto community. The issue has sparked a debate on the best path forward. One opinion suggests that Ethereum governance needs to contain Lido, as simply building a better alternative would not solve the problem. It is worth noting that liquid staking is one of the few DeFi categories where the top decentralized player is larger than the top centralized player. If Lido self-limits, centralized exchange (CEX) liquid staking providers that are not aligned with the decentralization ethos could overtake it. JPMorgan recently commented that Ethereum has become more centralized due to the surge in staking. However, it is important to understand that if Lido reaches a 33% market share, it does not automatically mean Ethereum is in trouble. Lido's node runners would have to collude and harm their own business for any significant impact to occur. Some argue that instead of relying on social agreements, the Ethereum protocol should be fixed to address the concerns with Lido. Additionally, a new report highlights that Ethereum liquid staking providers have a low exposure to illicit funds, which has raised concerns among big finance firms.