How liquid staking can potentially harm the Ethereum ecosystem: HashKey report

As it continues to grow, liquid staking brings considerable risks to the space and needs better decentralization, according to a report published by digital asset firm HashKey Capital.

As the table above shows, many LSD protocols rely on a small number of node operators that centralize a large number of validator nodes. According to the report, the number of node operators should be a “point of concern for centralization.”The report notes that centralization in liquid staking can have several harmful effects on the ecosystem, such as reduced competition and increased risk of censorship.

In addition, as it gets further centralized, there are risks of decreased security, as big staking players can make it easier for attackers to carry out 51% attacks. Moreover, there’s also an increased risk of collusion.

The report notes that centralization in liquid staking can have several harmful effects on the ecosystem, such as reduced competition and increased risk of censorship.

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