Vitalik Buterin, the co-founder of Ethereum, has recently expressed concerns about the potential monopoly that decentralized autonomous organizations (DAOs) could have over the selection of node operators in liquidity staking pools. In a blog post published on September 30th, Buterin warned that as staking pools adopt the DAO governance approach for selecting node operators, it can expose them to risks from malicious actors.
Buterin highlighted the example of the liquid staking provider Lido, which uses a DAO to validate node operators. While acknowledging that Lido has implemented safeguards against potential risks, Buterin emphasized that relying on just one layer of defense may not be sufficient. He explained that if a single staking token dominates within a DAO, it could lead to a single governance gadget controlling a significant portion of all Ethereum validators, making it vulnerable to attacks.
Meanwhile, Buterin also discussed Rocket Pool, which offers the opportunity for anyone to become a node operator by depositing 8 Ether (ETH), equivalent to approximately $13,406 at the time of writing. However, he noted that this approach also comes with risks. He pointed out that the Rocket Pool approach allows attackers to carry out a 51% attack on the network and force users to bear most of the costs.
Despite the risks associated with different approaches to selecting node operators, Buterin emphasized that having a mechanism to ascertain who can act as the underlying node operators is a necessary requirement. He noted that an unrestricted approach would allow attackers to join and amplify their attacks using users’ funds.
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To address the issue, Buterin proposed encouraging ecosystem participants to utilize a variety of liquid staking providers. By doing so, he believes that the likelihood of any provider becoming excessively large and posing a systemic risk would decrease. However, he also mentioned that relying too much on moralistic pressure to solve these problems is not a stable long-term solution.
In conclusion, Buterin’s concerns about DAOs exerting a monopoly over the selection of node operators in liquidity staking pools highlight the need for careful consideration of governance models within decentralized systems. While different approaches have their pros and cons, finding a balance between openness and security is crucial to ensure the stability and integrity of the network. By encouraging diversity among liquid staking providers, the risks associated with a single entity controlling a significant portion of validators can be mitigated. However, a long-term solution should involve more robust mechanisms to address potential risks and ensure the decentralization of power within blockchain networks.
