7. The $LSD initiative

There is a possibility of over 50% of staked ETH being on a single protocol or a single platform. This raises safety and security concerns post-Shanghai as the staked ETH ratio increases. (Please note that figures 4 and 5 are obtained from a Beacon Chain Deposits on Etherscan.)

Let’s think about any monopolized market, good or service that exists in the world. Google, is an obvious one, controlling over 90% of the search engine market worldwide. This means that google controls practically all flow of information to every single user of the internet across the entire planet. This makes it nearly impossible to know if something is being manipulated or misconstrued to propagate an agenda. Similarly, there is a security concern in any situation in which a majority of a token supply is held or utilized by a single entity.

Figure 4: Ethereum Beacon Chain Depositors by Entity

For staking, and liquid staking, there is always risk of a single protocol maintaining a majority portion of staked ETH, particularly after the Shanghai upgrade. It is well known that this upgrade will greatly improve the ratio of staked ETH to the circulating supply to closer match the other top competitors like BNB. With this coming and coming fast, liquid staking will be the go to for new users. Why? Because there is no financial requirement, there is no lock up requirement, and you stay liquid. For many, available liquidity is slim and there is no ability to venture into multiple DeFi opportunities. So, if your liquidity is locked up in staking, your participation decreases, and the overall network suffers from decrease in volume and decrease in innovation.

So, yes of course we want users to flock into DEFI and into staking post Shanghai. But, we must understand that a single protocol dominating the market share poses a security and centralization risk. $LSD’s initiative is to innovate, improve, educate, and assimilate new users into the beautiful world of liquid staking. We recognize the opportunity, and we also recognize the benefit competition brings to the market.

Currently three protocols dominate 86% of the TVL of liquid staking protocols: Lido with a whopping 64% market share, Coinbase and Rocket Pool. All provide fantastic services, promote the technology wonderfully and execute on their promises to users.

Figure 5: Ethereum Beacon Chain Depositors by Month

However, there is a concern about the risks associated if there is a monopoly held on the circulating ETH supply. Therefore, the goal is to further decentralize and dilute the staked eth supply away from just three protocols and spread this across the blockchain. Not only to improve security and efficiency of the network but to promote innovation and new collaboration between various communities.

Foster innovation.

Promote decentralization.

Encourage collaboration.