Coinbase's large Ethereum staking could lead to overcentralization, raising concerns about network decentralization
From Cointelegraph
March 28, 2025 12:06:00 PM:
Coinbase’s dominance as the largest Ethereum node operator raises concerns about network centralization, controlling 11% of staked Ether, more than any other operator. This concentration could undermine decentralization, according to industry executives. Liquid staking protocol Lido controls more staked Ether overall, with a distributed structure across independent node operators.
The risk of centralization in Ethereum’s network could increase if US ETFs are allowed to stake, a priority for asset managers like BlackRock. Coinbase, the largest custodian for US crypto ETFs, holds ETH for eight out of nine US spot Ether funds. Concentration poses risks of censorship and reduced network resilience, executives warn.
New US regulatory guidance allowing banks to act as validators on blockchain networks adds to centralization risks. If stake consolidates under regulated entities like Coinbase and US banks, Ethereum could resemble traditional financial systems, leading to potential points of regulatory pressure. However, more institutional validators could actually improve staking concentrations.
Institutional adoption accelerates centralization risks in Ethereum’s network. Coinbase’s dominance as the largest node operator and custodian for US ETFs, along with regulatory guidance allowing banks to act as validators, highlight concerns about network centralization. However, more institutional validators like Robinhood could help balance staking concentrations and potentially challenge Coinbase’s position.
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