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59% of staked ETH controlled by four providers

59% of staked ETH controlled by four providers

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The good news for Ethereum investors is that the merger came and went smoothly, without any issues. Ethereum is now a Proof-of-Stake blockchain, which means up to 99.95% less energy consumption.

But it’s not all fun and games. There is a lot of talk about the problem of centralization, but when you jump into the thread and look at the statistics, it highlights how big a problem it is.

To explain the issue thoroughly: in order to become a validator on the Ethereum network, now that mining has become obsolete after Merge moved the blockchain to Proof-of-Stake, an investor must have at least 32 ETH.

This is obviously heavy change – worth $42,000 at the time of writing – and therefore not feasible for most investors. In fact, the chain data below shows that only 122,000 wallets have more than 32 ETH. That’s 86 million non-zero wallets.

So hit the betting pools.

By locking their funds to a third party, investors can join pools with as little ETH as they want, and the third party collects funds to act as a validator. Think of it like buying stock in a company – you don’t own the entire company, but you get a percentage of the profits.

The only problem is that these third parties control huge amounts of the web.

In fact, the narrowing of the top four betting pools shows the problem. Of the 13.7 million ETH currently staked, 4.2 million are via Lido, 1.9 million via Coinbase, 1.1 million via Kraken, and 0.9 million via Binance. That’s 59% of the total value wagered through these four providers alone.

The data simply explains why some are concerned that the Merge to Proof-of-stake has led to greater centralization of the Ethereum network. Because in reality it is – and it’s hard to argue with the numbers above.

It’s refreshing to think what could happen if any of the above providers suddenly stopped performing their input duties for whatever reason. Maybe some kind of scandal in the company, or a regulatory reason (remember Tornado Cash), or any other unpredictable event.

With so much ETH staked through these providers, that’s a huge amount of value – and a key source of risk for the entire Ethereum blockchain.

Receive $10 in Bitcoin when you buy or sell $100 or more on Coinbase! https://mathisenmarketing.com/coinbase

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