Lido and Rocket Pool Duel Over Centralization Concerns

Tensions between top liquid staking providers Lido and Rocket Pool are escalating, with researchers from Lido calling out Rocket Pool over the purported decentralization of its Protocol DAO.

On July 4, Lido’s community staking lead, Dmitriy Gusakov, tweeted that his team identified an Externally Owned Account (EOA) with the power to change any of the parameters in the pDAO smart contracts. “That’s not how permissionless protocols should operate!” Gusakov wrote.

An EOA is a simple wallet typically controlled by a single entity. Most major web3 projects either use decentralized token-based governance or multi-signature wallets that require multiple people to sign off on transactions when dealing with administrative permissions.

Chris Blec, an outspoken web3 governance delegate, said Rocket Pool should disclose the EOA account on its homepage.

Rocket Pool community members were quick to defend the protocol.

Darren Langley, general manager at Rocket Pool, told The Defiant that the EOA account is well-known, and the project is already working to address it as part of its forthcoming Saturn upgrade.

“The pDAO has limited authority to modify specific settings and manage treasury spends, but it does not have control over the entire protocol,” Langley said. The pDAO is tasked with determining protocol parameters, including tokenomics, treasury utilization, and protocol configurations.

Langley added that an EOA was initially chosen to enable fast responses to potential security issues, “but the intention has always been to replace this with a robust community solution.”

RocketPool also has an Oracle DAO (oDAO), which is a group of nodes tasked with specialized responsibilities. The community is currently voting on a proposal that would slash oDAO members’ compensation.

Centralization of Staked Ether

The public spat comes as Lido faces increasing criticism from critics for its increasing control over the supply of staked Ether.

Based on data from Beaconcha.in and Dune Analytics, Lido’s validators now control 36% of the network’s 20.8M staked ETH, potentially incentivizing collusion between otherwise isolated stakers. For comparison, Rocket Pool controls just 3%.

In May, Vitalik Buterin, Ethereum’s chief scientist and co-founder, said no single staking pool should control more than 15% of the network’s validators, advocating for pools to increase fees to disincentivize adoption. Against this backdrop, Lido’s recent move to greenlight a revamped revenue-sharing program for ecosystem partners has drawn condemnation.

Lido Governance Greenlights Revamped Revenue Sharing Program

Critics Say Further Growth Of Leading Liquid Staking Protocol Poses Risk To Ethereum

“Lido going after Rocket Pool for not being decentralized enough is legit hilarious,” tweeted Marceaueth, a Rocket Pool community member.

Saturn Upgrade

While Rocket Pool is still determining what to include in its forthcoming Saturn upgrade, Langley said introducing on-chain voting is a high priority for Rocket Pool’s team and community.

Recent discussions indicate Rocket Pool is exploring token-based voting using a quadratic system to bolster the voting power of smaller community members. A brainstorming document discussing Saturn shows the community is considering including autostaking, an integration with EigenLayer, and zero-knowledge-powered oracles in the upgrade.