Liquid staking (LST) has emerged as a popular solution for Ethereum users to participate in staking without locking up their Ether (ETH) for extended periods. However, concerns have been raised about the potential for liquid staking to centralize power within the Ethereum ecosystem. In this interview, Daniel Dizon, founder of Swell, a noncustodial ETH liquid staking protocol, discusses these concerns and shares his vision for the future of liquid staking on Ethereum.
CT: Liquid staking has been criticized for centralizing power within the Ethereum ecosystem. What are your thoughts on these discussions?
Daniel Dizon: From a network perspective, two fundamental properties make Ethereum valuable — decentralization and security.
When multiple node operators are tied together — either operationally, politically, or through a liquid staking governance token — they are more likely to act as a single entity with outsized influence over Ethereum, threatening the values of these core qualities.
This was first pointed out in Danny Ryan’s seminal paper, pointing out the dangers of “cartelization” and the drastic risks posed by a single dominant liquid staking protocol, and has since been echoed by the likes of Vitalik Buterin, who suggested that any protocol controlling more than 15% of all validators should be limited by social pressure.
Speculative controversial take: we should legitimize price gouging by top stake pool providers. Like, if a stake pool controls > 15%, it should be accepted and even *expected* for the pool to keep increasing its fee rate until it goes back below 15%. https://t.co/cOtuM7Occd
CT: To mitigate the risks of centralization, what steps do you think the Ethereum community and stakeholders should take?
DD: TheRead more on cointelegraph.com