Is Ethereum at Risk? Here’s What You Need to Know
Ethereum has been making headlines lately with the potential launch of an ETH spot ETF and an upcoming network upgrade that promises increased scalability and reduced gas fees. However, there are some important issues surrounding Ethereum staking that need to be addressed.
1) Two Issues With Staking ETH
Staking Ethereum has become popular, thanks to platforms like Lido that offer liquid staking. This allows you to earn double rewards by staking your ETH and receiving liquid staking tokens in return. However, there are two potential issues with staking Ethereum: most staking pools use only one execution client (Geth), and there are maximum thresholds for staking protocols.
2) One Execution Client Staking Pools
Validators typically run two different clients: one for consensus and one for execution. The problem is that 78% of all node owners use the same execution client (Geth). This lack of diversity poses a risk to the Ethereum network, as a bug or vulnerability in Geth could have disastrous consequences.
3) The 33%, 51%, and 66% Thresholds
There are three critical thresholds to consider: the 33% threshold, where a bad actor can disrupt the liveness of the network; the 51% threshold, where a chain split may occur; and the 66% threshold, where a bad actor has full control over block validation. With Geth’s super majority of 78%, Ethereum is dangerously close to these thresholds.
4) Max Thresholds for Staking Platforms
Lido, the largest staking platform with a market share of almost 32%, is approaching the 33% threshold. While it would be difficult for Lido to pose a threat with a 33% stake, its governance structure, which gives majority power to VCs, is a cause for concern.
Hot Take: Ethereum’s Staking Bomb
The lack of execution client diversity and the nearing of
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