Technology

Will a Proof-of-Stake Ethereum Lead to More Centralization?

When Ethereum eventually shifts from its current proof-of-work method to a proof-of-stake (PoS) consensus mechanism, it will rely on validators rather than on miners to validate transactions on the Ethereum blockchain. In order to run a validator and earn staking rewards, participants must stake 32 ETH, which is worth roughly $65,800 at current prices. Lido is a staking-as-a-service provider that allows users to deposit any amount of ETH to earn staking rewards on the Beacon Chain. With Lido, users bypass the requirement of needing the full 32 ETH deposit to run a validator node and aren’t responsible for the technical maintenance required to manage a staking node. In return for accepting ETH deposits, Lido issues stakers stETH, its derivative token that “represents staked ether in Lido, combining the value of initial deposit + staking rewards,” according to Lido. Lido stakers can hold their stETH, sell it on the open market or deposit their stETH in different DeFi (decentralized finance) platforms, including Curve, Aave and 1inch, to earn additional yield.

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