Monday also saw the debut of Lido's community staking module on the Holesky test network, which aims to allow new entities, including solo stakers, to become node operators without needing permission from the DAO.
Lido jump-started the liquidity staking ecosystem in 2020 with the introduction of its flagship product, stETH, a rebased token that represents the principal amount of staked ETH as well as rewards for contributing to securing the Ethereum blockchain network.
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Posted on July 2, 2024 at 6:55pm EST.
As it faces charges from the U.S. Securities and Exchange Commission, liquid staking leader Lido is preparing to become more decentralized by taking steps to integrate a more diverse range of Ethereum node operators, including solo stakers, who are the “gold standard” of staking, according to the Ethereum Foundation.
On Monday, the Holesky test network enabled the Lido initiative, which is said to be a community staking module that is expected to allow node operators permissionless participation. Governing Post Dmitry Gusakov, technical lead for Lido’s community staking product, made the announcement on Lido’s forums.
The move comes days after the SEC suggested in its lawsuit against Ethereum software provider ConsenSys that Lido’s liquidity staking token, stETH, was an unregistered security. Staked ETH, also known as stETH, represents the principal amount of an individual’s staked ETH, as well as staking rewards for contributing to securing the Ethereum blockchain network.
Lido's stETH market cap is $33 billion, making the liquidity staking provider the top DeFi protocol by total value locked. Dune Analytics Dashboard According to crypto analyst Hildobby, Lido holds a 29% share of the total 33.3 million ETH staked.
The arrival of Lido’s community staking module marks a change to the protocol, which first introduced liquidity staking in 2020. This is because Lido on Ethereum has had a curated and permissioned set of validators since its inception, and anyone interested in acting as a node operator on Lido had to be vetted by the Lido DAO.
Read more: How Liquid Staking Works
Permissions and Restrictions Since the Beginning
Unlike competitor Rocket Pool, before a node operator can act as a validator on Lido, governance must vote on whether a candidate address should be included in Lido's set of active node operators. At the time of writing, Lido 39 Node OperatorsThese include P2P.org, Chorus One, Consensys, and others.
The initiative, centered around permissionless entry, “allows any node operator, from community stakers and solo stakers to friend groups and amateur operators, to run a validator by providing an ETH-based bond (security collateral),” the summary states. documentation.
The new community module incorporates several features such as low coupling for node operators, smoothed rewards from Ethereum’s execution layer, and maximum extractable value, which is expected to make solo staking more accessible.
Decentralization as an escape from the SEC?
The effort comes days after the SEC charged ConsenSys with offering and selling unregistered securities, specifically Lido and Rocket Pool liquidity staking tokens, through Metamask, a crypto wallet that allows users to stake and exchange cryptocurrencies.
ConsenSys, which is also a node operator for Lido, “offered and sold tens of thousands of unregistered securities on behalf of liquid staking program providers Lido and Rocketpool. It created and issued liquid staking tokens (referred to as stETH and rETH) in exchange for staked assets,” the SEC press release stated. state.
read more: Could the SEC bring a lawsuit against Liquid Staking Protocol?
The complaint calls Lido and Rocket Pool unregistered securities issuers and alleges that their staking programs are “each offered and sold as an investment contract, i.e., a security.”
Following the so-called Howey test, which has been the legal standard since a 1946 court case to determine whether an investment is an offering of a security, the regulator said these liquid staking tokens meet the test.
The press release states that LST purchasers will “invest ETH in the common venture with the reasonable expectation of benefiting from the management efforts of Lido and Rocket Pool, respectively.” However, neither Lido nor Rocket Pool have filed registrations with the SEC to offer these securities.
The fourth element of the Howey Test is “control efforts of others,” and crypto projects have sought to become decentralized enough that such third parties cannot be easily named.
Lido’s governance token, LDO, is trading at $1.92, down 6.3% in the past 24 hours and 19.7% in the past 30 days, giving it a market cap of $1.7 billion. Coin Gecko.
