ethereum [ETH] Concentration risks are becoming more apparent, especially while awaiting U.S. spot ETF approval.
Even traditional finance (TradFi) has expressed concerns about this risk, hinting that if U.S. spot ETFs are cleared by the SEC, the outcome will be zero-sum.
S&P Global covered ETH staking in its February report, saying: lido [LDO] As one of the major concentration risks.
“The increase in Ether staking ETFs could impact the mix of validators participating in the Ethereum network’s consensus mechanism. The participation of institutional custodians will reduce the current concentration on the Lido decentralized staking platform. It may be alleviated.”
However, the report also notes that such a move “could pose new concentration risks, especially if a single entity is chosen to invest the majority of Ether in these ETFs. ” he also pointed out.
As such, S&P Global called for consistent monitoring of concentration risk regardless of the impact of Spot ETH ETFs.
Besides staking, Ethereum running client software, especially domination of guessis another risk factor.
Vitalik Buterin’s “Rainbow Staking” Solution
Ethereum co-founder Vitalik Buterin told Taipei ETH. mentioned New “Rainbow Staking” proposal – A plan to enhance staking versatility using less than 32 ETH, alongside less overwhelming node operations.
Elaborating on rainbow staking, Buterin said, “The idea here is to clearly separate two types of staking and call them heavy staking and light staking.”
But he acknowledged that there are difficulties with such a proposal.
“The part below 32 ETH is more difficult, basically 32 ETH originally means you don't need too many ETH to become a staker, and you don't want too many stakers because the blocks will be too difficult to process. It was a compromise between the two.”
The rainbow staking proposal is in the testing phase and will likely take more time to become an official solution to staking concentration risks.
On the other hand, some major ETH holders running validator nodes like Coinbase have embraced the demand for diversity of Ethereum running clients, has migrated To NethermindETH. However, Geth-running clients are still the overwhelming majority. 66%.
Meanwhile, the Ethereum Foundation is under the jurisdiction of the SEC investigation, which could impact the Spot ETH ETF. However, it has not yet been determined whether concentration risks are part of the investigation.
