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@chaskin.eth
ETH's staking econ is under scrutiny. A post by @caspar highlights an issue: if left unchanged current incentives could lead to a majority of ETH being staked, posing risks to the network's decentralization. Lets break it down 🧵 0/9 https://ethereum-magicians.org/t/electra-issuance-curve-adjustment-proposal/18825
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@chaskin.eth
1/ Currently, 26% of all ETH is staked. While staking is essential for network security, Caspar suggests the current incentive structure will drive this percentage to unsustainable levels with significant implications for Ethereum's core principles
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@chaskin.eth
2/ A major concern is the potential dominance of LSTs. As staking participation increases, LSTs are likely to control a majority of staked ETH
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3/ The LST market could be winner-take-all leading to: - The LST could gain greater utility as money than ETH itself - The dominant provider would have immense power over Ethereum governance and transaction inclusion - Systemic risk to the LST poses a wider threat to the entire network
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@chaskin.eth
4/ The primary function of staking is to secure the network. It can be argued that we're already overpaying and diluting ETH too much, as we have $105BN in economic security. The question is whether we need 4x more staked ETH to secure the network. This post says no
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