Lido, the liquid staking protocol, now controls over 30% of all staked ETH, raising serious questions about centralization and governance. In the latest episode of Web3 Decoded Codex, the team dives deep into Lido’s mechanism, its stETH token, and the risks of concentrated power.
The episode explains how Lido works: users deposit ETH and receive stETH, which accrues staking rewards and can be traded. But the real concern is who controls the underlying stake. Lido’s DAO selects a small set of node operators, creating a bottleneck that contradicts Ethereum’s decentralization ethos.
If the DAO is compromised or node operators collude, stakers’ funds could be at risk. Critics call Lido a "Trojan horse" that centralizes control while offering convenience. The episode urges viewers to understand these trade-offs before committing ETH to any liquid staking protocol.