Ethereum's Co-founder Warns of Risks in DAOs Controlling Node Operators Selection
Summary:
Ethereum co-founder Vitalik Buterin warns about potential risks of Decentralized Autonomous Organizations (DAOs) controlling the selection of node operators in liquidity staking pools. He voiced that dependence on a single staking token could make Ethereum validators susceptible to attack. He applauded the staking protocol Lido's safeguards, but emphasized the need for multi-layer protection. Buterin also commented on the potential threats associated with becoming a node operator via Rocket Pool. The solution, he suggested, lies in diversifying across various liquid staking providers to decrease system risks.
Ethereum's co-founder, Vitalik Buterin, has voiced concerns over the potential that decentralized autonomous organizations (DAOs) could monopolize the decision-making process for node operators in liquidity staking pools. In a blog entry dated September 30, Buterin cautioned that if liquid staking pools started utilizing DAOs for node operator governance—who are ultimately in charge of the pool's financial resources—it could make them vulnerable to threats from malicious parties. “If a single staking token holds sway, it could result in one potentially vulnerable governance gadget that controls a significant chunk of all Ethereum validators," he warned.
Buterin singled out the staking protocol Lido (LDO), which operates a DAO that approves node operators. Despite acknowledging Lido's implementation of safeguards, he underlined that depending on a single protective measure may not provide adequate protection. “While protocols like Lido have added protective measures, a single layer of defense might not suffice," he asserted.
In his post, Buterin noted that the service Rocket Pool provides a path for anyone to become a node operator through a deposit of 8 Ether (ETH), which is roughly equivalent to $13,406 at the moment. However, this method is not without its pitfalls. "The Rocket Pool strategy allows attackers to orchestrate a 51% attack on the network, saddling users with a considerable portion of the costs," he pointed out.
Related: Impending Doom for Ethereum due to Liquid Staking Tokens
He suggested one possible solution would be to motivate participants in the ecosystem to spread their operations across several liquid staking providers. This would lessen the chance of one provider gaining an excessive dominance and thereby posing a systemic threat. However, Buterin added, “In the end, this is an unstable equilibrium, and relying solely on moralistic pressure to fix issues is potentially hazardous."
Magazine: Reflections on the Viability of DAOs – Insights from the Trenches.
Published At
10/1/2023 6:11:14 AM
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