Coinbase is the second largest ETH staking entity, but concerns arise due to Lido’s dominance.
Coinbase is the second largest ETH staking entity, but concerns arise due to Lido's dominance.
Coinbase Emerges as a Major Player in the Ethereum Staking Market
Prominent crypto exchange Coinbase has recently made waves in the Ethereum staking market, solidifying its position as the second largest ETH staking entity. According to a report from Dragonfly data scientist hildobby, which utilizes data from Dune analytics, Coinbase currently holds a staggering 3.873 million staked ETH, representing 14.1% of the total staked ETH.
Despite Coinbase’s significant presence in the ETH staking sphere, their dominance is outweighed by the liquid staking platform, Lido DAO, which accounts for approximately one-third of all staked ETH. Other notable platforms in this space include the Binance and Kraken exchanges, with market shares of 4.2% and 3.0% respectively. The Figment staking pool also holds a notable 4.9% market dominance.
It’s important to highlight that Coinbase has witnessed a substantial 44% increase in ETH staking activity over the past six months. Interestingly, this increase corresponds with the period during which the Ethereum Shanghai upgrade has been active.
There were concerns that the recent Ethereum network update might lead to a decline in staked ETH due to the newfound ability to withdraw staked assets. However, the Shanghai upgrade has boosted confidence among stakers, resulting in a net positive flow of 7.84 million ETH since its implementation in April.
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Currently, the total amount of staked ETH stands at 27.42 million, accounting for approximately 22.81% of ETH’s circulating supply.
Lido’s Dominance Raises Centralization Concerns
In addition to Coinbase’s impressive market share, there are growing concerns within the community regarding the centralization of the ETH staking market, specifically with regards to Lido DAO. With the Proof-of-Stake Consensus model, a higher amount of staked ETH translates to increased voting power during governance processes.
Data from Dune Analytics reveals that Lido DAO holds a significant 8.80 million staked ETH, representing 32.11% of the overall ETH staking market. Notably, Lido has experienced a substantial 55% increase in staking activity over the past six months.
According to information from Ethereum’s official blog, these concerns about centralization are valid. If a validator controls at least 33% of the staked ETH, they have the potential to prevent the network from finalizing any block, even when there is a 66% majority. Moreover, if a validator attains control over 55% of the staked ETH, they could potentially split the Ethereum chain into two forks. It’s essential to note that these are speculative scenarios, as no evidence points toward Lido DAO having any malicious intentions towards the Ethereum network.
Ethereum Market Update
As of now, ETH is trading at $1,620.18, experiencing a modest 1.36% decline in the last 24 hours, based on data from CoinMarketCap. Similarly, the token’s daily trading volume has decreased by 36.41% and currently stands at $2.86 billion.
With Coinbase’s emergence as a major player in the Ethereum staking market, and concerns surrounding the centralization of Lido DAO’s dominance, the landscape of ETH staking continues to evolve. As the Ethereum ecosystem progresses and undergoes further upgrades, it will be fascinating to observe how the balance of power among staking entities shifts and the potential impacts on the network’s decentralization and governance.