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Decentralization advocates are celebrating Arbitrum governance for rejecting a proposal from Lido, the largest net staking provider, which requested a 4 million ARB grant to fund incentive programs.

A week-long vote concluded on October 12, with 43.6% of votes cast in favor of the proposal, compared to 31.3% against and 25% abstaining—not reaching the 50% threshold needed to secure the concession.

“I am proud that Arbitrum delegates voted against incentives for Lido on their network,” tweeted Superphiz, ETHStaker community organizer. “This is a win for our future.”

“Arbitrum delegates sent a strong message,” these Evan Van Ness, who runs the Week In Ethereum newsletter. “Arbitrum votes against providing Lido incentives… Ethereum’s immune system is waking up.”

Lido was among 29 projects that requested a share of the 50 million ARB ($40 million) available as part of the Arbitrum Short-Term Incentive Program (STIP). The funds are reserved to finance incentive programs designed to attract and strengthen the adoption of Arbitrum and cannot be converted into other assets.

Voting closed on the 13th, with governance delegates approving the majority of entries. GMX, a decentralized perpetual protocol, received the largest allocation with 12 million ARB, followed by leveraged DEX Gains Network with 7 million ARB. Around 100 projects have now applied for STIP funding, with around 60% of applications being approved.

Lido said it would use the requested ARB to incentivize stETH liquidity paired with ETH and stablecoins on Arbitrum-based decentralized exchanges. The project added that deeper liquidity could pave the way for native creation of stETH on Arbitrum in the future.


The pushback against Lido stems from its dominant control over staked Ethereum, with Lido validators currently commanding 31.7% of staked Ether, according to Dune Analytics. Coinbase is the second largest at 4.4%.

Ethereum researchers warn that Lido could pose a threat to the network’s decentralization if the percentage exceeds 33%.

In a recent appearance on the Web3 Builders podcast, Danny Ryan of the Ethereum Foundation stated that any single entity that accumulates a third of Ether in stakes represents “a systemic threat to Ethereum.”

Ryan noted that when Lido voted against limiting its staking dominance last year, the three largest LDO holders could have changed the outcome of the vote, despite 99% of votes rejecting self-imposed limits. Ryan advocated for Lido to impose a 25% limit on itself.

“Once you hit a third, if someone served these three operators at Lido… and they said ‘hang up,’ then we would have a continuity problem,” Ryan said. “That’s where we start to have potential problems.”

*Translation of the article “Lido Misses Out As Arbitrum Grants Vote Closes” with permission from The Defiant.

Notice: The text presented in this column does not necessarily reflect the opinion of CriptoFácil.

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