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The Lido Finance protocol, the leader in net staking on Ethereum, has reached a new record in its development by registering one million Ethereum validators.

This achievement marks a significant increase in participation in Ethereum 2.0 staking, signaling a step forward for the security and resilience of the network. Mass membership of validators strengthens the network, making it more robust against potential attacks.

Based on data provided by Dune Analytics, Lido Finance now controls a majority share of 28.5% of staked Ethereum. This number is closely followed by Coinbase, with a 13.6% share, indicating the considerable influence of these platforms in the staking ecosystem.

Lido stands out

Liquid staking protocols, like the one offered by Lido Finance, have experienced notable growth due to the liquidity benefits they offer.

By exchanging staked Ether for Lido Staked ETH (stETH), users can maintain the flexibility of their assets, which is in contrast to traditional staking where funds are locked during the staking period.

These protocols play a key role in democratizing staking by removing the barrier to entry of the 32 Ether minimum requirement to run a validator node. This allows users with limited capital to participate in the staking process, increasing decentralization and inclusivity in the crypto ecosystem.

While the growing number of validators signals greater security for Ethereum, some community members have raised concerns about potential downsides.

Venture capitalist Evan Van Ness expressed concern about staking saturation, suggesting that there may already be a surplus of ETH being staked. Likewise, Gabriel Weide warned about the increased likelihood of failed transactions and operational challenges that arise with a high number of validators.

Staking Challenges

Peter Kim, head of engineering at Coinbase Wallet, acknowledged the growth in the number of validators, but pointed out that the current count may be inflated due to the 32 ETH staking requirement. However, he suggested possible adjustments to this requirement in the future.

Responding to concerns about network centralization, Ethereum co-founder Vitalik Buterin proposed a solution to improve decentralization. In a recent blog post, he suggested penalizing validators in proportion to their average failure rate, with the aim of mitigating the advantage of larger ETH stakers over smaller ones.

He theorized that individual validators with large stakes could potentially influence multiple identities, increasing the impact of any mistakes made. Buterin also highlighted the risk of correlated failures in validator clusters, such as staking pools, which share infrastructure and are more susceptible to synchronized outages.

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