14 Million ETH and Counting: The Growing Influence of Ethereum Liquid Staking Giants

One month ago, ethereum liquid staking derivatives (LSD) protocols collectively held 14.08 million ETH, crossing the 14 million milestone. Since then, these protocols have scooped up an additional 60,000 ETH.

Ethereum’s Liquid Staking Surge

Ethereum liquid staking has skyrocketed in popularity recently, with protocols now securing 11.74% of the total 120,401,221 ETH in circulation. For perspective, that’s 5.15 times more than the 2.28% of ETH managed by U.S. spot ether exchange-traded funds (ETFs). By late Sept., 30 liquid staking protocols reached the 14 million ETH threshold, and Bitcoin.com News at the time reported a combined total of 14.08 million ETH.

Breakdown of all 30 liquid staking protocols and their shares.

Over the past 29 days, decentralized finance (defi) liquid staking protocols added another 60,000 ETH, worth nearly $150 million. Currently, defillama.com data shows that LSD platforms collectively hold 14.14 million ETH. Lido Finance leads by a landslide, commanding 68.97% of the market with its 9.75 million ETH holdings. This is down slightly from last month, when it held 9.8 million ETH and captured 69.59% of the LSD market.

Breakdown of the top five LSDs in terms of weekly inflows and outflows.

Following Lido, Binance’s LSD platform has seen considerable growth over the past 90 days. Last month, Binance held 1.42 million ETH, and now it’s up to 1.52 million. In third place, Rocket Pool’s LSD saw a modest boost, climbing from 1.22 million to 1.23 million ETH. Rounding out the top five, Mantle holds 480,629 ETH, while Coinbase’s staked ether protocol secures 182,430 ETH. Together, these top five LSD protocols hold roughly 13.16 million ETH, or 93.09% of the ETH held by LSDs.

Why Ethereum Staking Giants Are Raising Eyebrows

Besides defi protocols, validators are staking ETH, some of which is operated by these defi platforms. With ethereum (ETH) liquid staking consolidating around a few big players, the potential impact on network security and decentralization is substantial. Significant assets managed by entities like Lido and Binance introduce vulnerabilities. Any technical, regulatory, or governance-related failure could send shockwaves across ethereum, challenging its resilience and community commitment to decentralization.

Last year, Vitalik Buterin, Ethereum’s co-founder, voiced concerns about staking a significant portion of his ETH holdings, citing security risks in the current system. Buterin emphasized that staking exposes keys to online access, raising security concerns, especially without a robust multi-signature setup. He also noted the complex process of establishing a safer staking environment for ETH holders.

In his recent “Scourge” outline, Buterin raised red flags about the growing centralization in ethereum staking, cautioning that power consolidation among a few large entities could undermine Ethereum’s decentralized ethos. He sees this trend as one of Ethereum’s primary risks, as centralization could weaken network security and resilience, making ethereum more susceptible to manipulation and censorship.

Buterin further critiques how easily prominent staking providers could gain substantial control over Ethereum’s network. Such centralization, he argues, challenges Ethereum’s core values by diluting the influence of individual validators and potentially creating power dynamics reminiscent of traditional financial systems.

Source