Ethereum co-founder, Vitalik Buterin, has proposed a solution to mitigate the potential systemic risks posed by large liquid staking providers. Liquid staking involves locking up crypto assets such as Ether (ETH) in order to earn staking rewards on a proof-of-stake (PoS) blockchain network. However, the concentration of these assets in the hands of a few providers could pose a risk to the overall stability of the network.
Buterin’s proposal suggests introducing a cap or limit on the amount of ETH or other staked assets that a single provider can handle. By doing so, the risk of concentration is minimized, making the network more robust and secure. In addition, this approach also encourages decentralization by promoting the participation of multiple stakeholders rather than relying on a small number of entities.
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