1 min read

Are pools decentralized?

Ethereum successfully completed the merge, migrating to proof of stake! Now, the community is concerned because roughly a third of all staked eth is held by only two entities: lido and binance.

Most large stakes, and Lido in particular, are pools of eth that many people have deposited tokens into. Is this pooling of tokens just centralization all over again?

It depends on the specifics of the blockchain and the pool contract. I'm no expert on Ethereum's PoS or Lido's contracts, so my analysis is generalized.

As long as the implementation allows you to pull your support from the pool at any time, then there's no loss of individual freedom.
Blockchains that require a minimum staking period of time lose freedom with pooling. Pool contracts that lock your tokens should not be trusted.

Unfortunately, even when pooling results in centralization and loss of freedom, people will still do it. That's because depositing tokens into a contract for a % yield is easy. Much easier than running the blockchain software yourself.

Pools do introduce centralization, but with the right design, that's not an issue.


P.S. This is why I like the design of Koinos proof of burn and feel comfortable with burn pools on koinos. You have complete freedom to withdraw at any time.