Biggest Ethereum holder on market is not as decentralized as you might think
The Ethereum merge was the largest and most fundamental update to Ethereum in the history of the network. However, the decentralization of the network may have taken a hit, given the questionable holder distributions and the dubious nature of the biggest Ethereum investors in the market.
Lido’s “decentralized model”
It is not a secret that Lido Finance is one of the biggest holders of “new” Ethereum that functions purely on the PoS model. But Lido itself has a certain financial model where the staking rewards received by the pool are not being sent out to delegators as they are.
Instead, Lido keeps all rewards and instead sends stETH to delegates, which technically makes Lido a centralized ETH holder that can later use it without users’ consent. The decentralization of Ethereum is being questioned, with non-stakeholders ethereum burning and rewarding one unit.
Paid out stETH tokens are not getting burned either, which is another factor that speaks in favor of centralization. Unfortunately, users will not be able to take control of their own ETH until staking contract withdrawals are allowed.
Lido bets cause turmoil in the ETH market
Back in June, the market was on the verge of a catastrophe when the staked ETH token began to lose parity with spot Ethereum due to liquidity issues and the TeraUSD catastrophe. Despite having one of the deepest liquidity pools in the market, the relatively moderate selling volume was enough to crash the value of the tokens issued by Lido.
Potentially, the crash of stETH can cause bigger turmoil on the market than the TerraUSD situation, considering the volume of tokens investors are holding right now.
