Ethereum’s long-awaited update, Merge, has been released. With the transition from the PoW to PoS network, the Ethereum blockchain will become more energy efficient. In addition, miners will no longer be the validators of the network. Instead, stakers will ultimately take on the role of validating and maintaining the security of the Ethereum blockchain.
A blockchain analytics company, Nansen, made a recent report on the distribution of Ether (ETH) and its significant holders. According to the report, five entities control up to 64% of the ETH held.
Lido DAO as the largest staked ether holder
While outlining the details of its report, the firm noted that Lido DAO is the largest stake provider for the merger. The DAO has a share distribution of 31% of all Ether staked.
The next three most significant holders are the popular exchanges Binance, Kraken and Coinbase, with a combined share of 30% of ETH staked. Their respective proportions of Ether staked are 6.75%, 8.5% and 15%.
The fifth holder, labeled “unlabeled,” is a group of validators. The group controls about 23% of the ETH shares held.
Additionally, the analytics firm reported on the liquidity ratios of all staked Ether. He revealed that only 11% of the accumulated circulating Ether is staked. 65% of this bet value is liquid, while 35% is not. Nansen’s report added that the Ethereum blockchain has a total of 426 thousand validators while depositors are 80 thousand.
The development of Lido and other DeFi on-chain liquid stake platforms is for a specific agenda. First, they need to counter the risk of centralized exchanges (CEX), as the latter accumulate more significant proportions of staked ETH. This is because CEXs must operate under the regulations of their jurisdictions.
Need for a fully decentralized platform
Therefore, DEXs like Lido must be fully decentralized to resist censorship continuously, according to Nansen’s report. However, chain company data showed a contrary position for Lido.
The data indicated that the ownership of the Lido Government Token (LDO) has a tilt. Therefore, groups with larger token holders are more at risk of censorship.
The firm cited that the top 9 addresses of the Lido DAO control 46% of the governing power. This means that only a small number of addresses are dominant in the proposals. Therefore, sufficient decentralization is required for an entity like Lido with the most considerable proportions of Ether staked.
In addition, the analysis firm mentioned that the LIDO community is already making moves to avoid risks of excessive centralization. For example, it has plans involving dual governance and the creation of proposed legal and physical distributed validators.
In addition, Nansen highlighted the non-profitability of the majority of Ether held. But he pointed out that illiquid stakers still have 18% of the ETH staked, which is profitable.
The company mentioned that these participants would likely engage in massive selling when pullbacks became possible. However, the transfer will take 6-12 months after the merger.
Featured image from Pixabay, chart from TradingView.com