Morgan Stanley’s recent research report pointed out that the market share of Lido, the largest liquidity staking protocol on Ethereum, has decreased from one-third a year ago to one-fourth currently. This may alleviate concerns about the centralization of the Ethereum network and increase the possibility of Ethereum not being recognized as a security in the future.
Ethereum being classified as a security or a commodity has always been a popular topic. However, banking giant Morgan Stanley stated that due to the increasing decentralization of Ethereum, it can avoid being designated as a security.
Morgan Stanley: Decrease in Lido Market Share Prevents ETH from Being Classified as a Security
According to CoinDesk’s report, Morgan Stanley stated in a research report that Lido, the largest liquidity staking protocol on Ethereum, has seen a continuous decrease in the amount of Ethereum being staked, from about one-third a year ago to about one-fourth currently.
Analysts pointed out that as emphasized in the “Hinman document” released by the U.S. Securities and Exchange Commission (SEC) in June last year, decentralization plays an important role in determining the classification of digital tokens as securities. At that time, SEC officials pointed out that tokens operating on a “sufficiently decentralized” network may not meet the standards of being considered securities, mainly due to the lack of a controlling entity in the Howey sense.
After the release of the Hinman document last year, Morgan Stanley analysts suggested that U.S. legislators could create a new “other category” to classify Ethereum, thereby avoiding it being classified as a security while ensuring investor protection. However, SEC Chairman Gary Gensler declined to comment on whether Ethereum is exempt from securities regulation.
Lido’s Market Share Falls Below 30%
According to information from the Dune data panel created by @hildobby, Lido’s market share of staked ETH has fallen below 30%, from 32% in December 2023 to the current 29.57%. This change alleviates concerns about the growing influence of Lido in the Ethereum ecosystem.
Other important participants in the Ethereum staking ecosystem include cryptocurrency exchanges Coinbase (14.04%), Binance (3.75%), and staking platform Kiln (3.5%). (The second largest share held by an “unknown” entity is excluded)
Ethereum co-founder Vitalik Buterin has previously stated that the market control share of a single staking pool should not exceed 15%, and even proposed that its market share should be reduced to below 15% by increasing fees. Based on the current market situation, Lido still needs further efforts to achieve Buterin’s proposed goal.
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