Lido's 34 node operators manage US$16.5 billion in pledged ETH, raising governance questions

Lido's 34 node operators manage US$16.5 billion in pledged ETH, raising governance questions.

Dr. Dana Love once again focuses on the concentration of Ethereum pledged ETH among a few node operators, especially through Lido's liquidity pledge platform. As the largest liquidity pledge agreement on Ethereum, Lido plays a central role in managing pledged ETH, and its governance structure is increasingly under community scrutiny.

Small groups control a large share of ETH

Love pointed out that there are only 34 screened node operators within Lido, managing approximately 8 million ETH, worth approximately US$16.5 billion. According to his analysis, this reflects a licensing system in which operating rights are concentrated in the hands of a few selected participants rather than widely dispersed among many participants. He believes that focusing solely on the number of verifiers will conceal the fact that who actually controls the ETH pledge rights on the network.

Love emphasized that the number of validators has never been a criterion for decentralization; what really matters is how much pledge share is actually controlled by a small number of operators.

In Lido's structure, ETH holders cannot automatically become operators. Interested parties need to submit an application, review it by the committee, and approve it through governance voting before joining the screening list.

Mini Dictionary: Lido is a decentralized liquidity pledge protocol on the Ethereum network. Users can pledge ETH and receive the liquidity pledge token stETH; screening node operators are vetted participants who run verification nodes on behalf of the Lido pledgers.

The focus of discussions between Screening Module v2 and Margin Requirements

focused on Lido's upcoming Curated Module v2, which sets margin requirements for its screening operators. Under the proposed plan, each operator would need to provide collateral in the form of ETH to cover losses caused by validator downtime, curtailment incidents or improper handling of execution rewards. Love said that the first verifier key managed by the operator requires 11 ETH as collateral, and the mortgage amount required by subsequent verifiers is significantly reduced.

In contrast, Lido's Community Staking Module requires small operators to provide 2.4 ETH for the first verifier and 1.3 ETH for each additional verifier. Love believes that this structure allows existing screening operators to obtain more capital-efficient arrangements in terms of scale, thus raising potential issues of operator access and economic fairness.

Screening module v2: The initial verifier margin is 11 ETH, the subsequent verifier margin is lower, and the operator access method is approved by the committee.

Community pledge module: Initial verifier margin is 2.4 ETH, subsequent verifier margin is 1.3 ETH, operator access method is open (subject to review).

Penalties and disputes over screening operators are handled by the Curated Module Committee, which uses a nine-person multi-signature wallet and requires six signatures for any execution action.

Verifier Merging and Decentralization Debates

Love also talked about recent changes related to the Ethereum Pectra upgrade and EIP-7251, which would increase the maximum valid verifier balance from 32 ETH to 2,048 ETH. This technical update allows the resources of a large number of small verifiers to be merged into the hands of a few larger verifiers, thereby reducing system overhead, but may not decentralize governance power over pledged ETH.

He pointed out that as the merger process progressed, the total number of ethereum validators had dropped from approximately 880,000 to 628,000. However, the underlying control has remained basically unchanged, and the same batch of screening operators still manage a large amount of pledged ETH through Lido.

When Love released the video, Lido's screening module v2 margin system had not yet been launched on the Ethereum main network. The smart contract audit is still in progress, and the first phase of deployment is expected to be completed before the end of the quarter.

With the margin system proposed by Lido, operational and governance risks remain mainly in the hands of a few participants rather than the broad ETH community. The new margin scheme aims to promote accountability, but permission-based operator screening, margin requirements and a commitment-led penalty mechanism together reflect the ongoing debate over risk and power in the Ethereum pledge ecosystem.