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The long-awaited Ethereum update, the merger, has been released. With the transition from the PoW network to the PoS network, the Ethereum blockchain will become more energy efficient. Additionally, miners will cease to be the validators on the network. Instead, players will finally take over the role of validating and maintaining the security of the Ethereum blockchain.

A blockchain analytics firm, Nansen, recently released a report on staked Ether (ETH) distribution and top holders. According to the report, five entities control up to 64% of staked ETH.

Lido DAO as largest staked ether holder

While outlining the details of its report, the company noted that Lido DAO is the largest staking provider for the merger. The DAO has approximately 31% equity distribution of all Ether staked.

The next three largest holders are popular exchanges Binance, Kraken, and Coinbase, with a combined 30% share of ETH staked. Their respective proportions of staked Ether are 6.75%, 8.5% and 15%.

The fifth holder, labeled as “unlabeled”, is a group of validators. The group controls around 23% of the staked ETH shares.

Additionally, the analytics company reported on the liquidity proportions of all staked Ether. It revealed that only 11% of cumulative circulating ether is staked. 65% is liquid from this staked value, while 35% is not. Nansen’s report added that the Ethereum blockchain has a total of 426,000 validators while depositors are 80,000.

Nansen reports that five entities control approximately 64% of staked ether
Source: Nansen

The development of Lido and other DeFi on-chain liquid staking platforms is for a specific agenda. First, they need to counter the risk of centralized exchanges (CEX), as these accumulate larger proportions of staked ETH. This is because CEXs must operate in accordance with the regulations of their jurisdictions.

Need a fully decentralized platform

Therefore, DEXs such as Lido need to be fully decentralized to permanently resist censorship, according to Nansen’s report. However, data from the on-chain company showed an opposite stance for Lido.

The data indicated that the ownership of the Lido Governance Token (LDO) has a slant. Therefore, groups with larger token holders have more risk of censorship.

The firm cited that the top 9 addresses of the Lido DAO control 46% of the governance power. This means that only a small number of addresses are the dominant propositions. It therefore requires sufficient decentralization for an entity such as Lido with the most considerable proportions of staked Ether.

Nansen reports that five entities control approximately 64% of staked ether
Ethereum falls below $1,500 l ETHUSDT on TradingView.com

Additionally, the analytics company mentioned that the LIDO community is already taking steps to prevent the risks of over-centralization. For example, it has plans involving dual governance and the creation of legal and physical distributed validator proposals.

Additionally, Nansen pointed to the unprofitability of the majority of Ether being staked. But he noted that illiquid stakers still hold 18% of staked ETH, which is in profit.

The company mentioned that these punters would likely sell off when withdrawals became possible. However, the move will take about 6-12 months after the merger.

Featured image from Pixabay, chart from TradingView.com



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