Lido Finance Will Expand The Number Of Validators To Increase The Decentralization Of Beacon ChainMathew Chavez
The Lido Finance staking service will implement distributed validator technology.<
Lido will adopt Distributed Validator Technology and start researching a scoring system that allow anyone to become a validator in Lido without permission and empower stETH holders to veto any decision that will be made. https://t.co/jqYVyrX29w
— Wu Blockchain (@WuBlockchain) April 15, 2022
There are also plans to develop a scoring system that will allow anyone to become a Lido validator without permission.
The initiative is part of a mission to lower barriers to staking Ethereum 2.0as well as increasing the degree of decentralization and security of the network.
According to Dune Analytics, over the past 30 days, 75% of new members were provided by the Lido Finance service. Such dynamics caused fears in the growth of its centralization.
The project involved 21 validators. The share of each is less than 2% of the total coins in staking. Lido Finance intends to reduce this figure to 1%.
The list of validators is constantly updated by experts to minimize risks for users.
The criteria are:
- diversification by geography and jurisdictions;
- lack of physical and legal connection between validators;
- use of own nodes;
- distribution between own and cloud infrastructure;
- implementation of the best industry practices in the field of security and key management;
- direct relationship between the financial results of operators and the popularity of the service;
- long-term alignment with the success of Ethereum and the decentralized economy.
This approach is not without drawbacks and is perceived as a temporary measure. Lido Finance intends to improve it by lowering barriers for node operators and creating incentives to encourage “good behavior” and minimize risks for management.
The technology of distributed validators will unite the latter into independent committees. Structures will start jointly proposing and confirming blocks, which will significantly reduce the risk of ineffective or incorrect behavior of one of the participants.
The step will allow connecting to the service those validators that are now perceived as “unreliable”. They will directly contribute to the decentralization of the group without creating a risk for Lido or Ethereum participants.
The second improvement is to create a node operator score composed of a number of metrics. The resulting figure will affect the distribution of remuneration.
The introduction of this innovation will allow moving away from the current binary approach (trusted and untrusted providers), as well as help improve their performance.
The project intends to improve governance within the DAO. In particular, it is planned to introduce new mechanisms that prevent unauthorized changes to Lido. Among them are temporary locks and granting veto power to a quorum of stETH holders.
According to DeFi Llama, Lido, with a TVL of $10.2 billion, ranks fourth among Ethereum-based DeFi protocols. Over the past month, the indicator has grown by 40.3%, while for the ecosystem as a whole – by 8.5%.
Recall Andreessen Horowitz invested in Lido Finance $70 million.