Ethereum co-founder Vitalik Buterin has acknowledged that centralization is a significant challenge for the Ethereum network. He believes that it may take up to 20 years to find a solution to this problem. However, a recent report by JPMorgan warns about the growing centralization in Ethereum staking since the Merge and Shanghai upgrades. The report states that the top five liquid staking providers, including Lido, Coinbase, Figment, Binance, and Kraken, control over 50% of staking on the Ethereum network. Lido alone accounts for almost one-third of the staking. While decentralized liquid staking platforms like Lido are seen as alternatives to centralized platforms, they still involve a high degree of centralization. For example, a single Lido node operator controls more than 7,000 validator sets or 230,000 Ether. JPMorgan analysts highlight the risks associated with centralization, including the potential for single points of failure or collusion. Additionally, post-Merge Ethereum has experienced a decline in staking yields, with standard block rewards dropping from 4.3% to 3.5% and total staking yield declining from 7.3% to around 5.5%. This increase in centralization and decline in yields have raised concerns among Ethereum observers.
