The Arbitrum governance has rejected a proposal from Lido, the largest liquid staking provider, for a 4 million ARB grant to fund incentive programs. This decision has been celebrated by decentralization advocates. The one-week voting process ended on October 12, with 43.6% of the delegated votes in favor of the proposal, compared to 31.3% against and 25% abstaining. However, this did not meet the required 50% threshold to secure the grant.
Superphiz, the organizer of the ETHStaker community, expressed his pride in the Arbitrum delegates’ decision in a tweet, referring to it as a victory for the future. Evan Van Ness, the administrator of the Week In Ethereum newsletter, stated that the Arbitrum delegates sent a strong message by voting against providing incentives to Lido, and claimed that Ethereum’s immune system is waking up.
Lido was among the 29 projects that requested a share of the 50 million ARB (worth $40 million) available through the Arbitrum Short-Term Incentive Program (STIP). These funds are reserved for financing incentive programs designed to attract and strengthen the adoption of Arbitrum and cannot be converted into other assets.
The voting concluded on October 13, with the governance delegates approving the majority of submissions. The GMX decentralized perpetual protocol received the largest allocation of 12 million ARB, followed by leverage DEX Gains Network with 7 million ARB. Around 100 projects have now applied for STIP funding, with approximately 60% of the submissions being approved.
Lido stated that they would have used the requested ARB to incentivize stETH liquidity paired with ETH and stablecoins on Arbitrum-based decentralized exchanges. The project also added that deeper liquidity could pave the way for native stETH creation on Arbitrum in the future.
The resistance against Lido stems from its dominant control over Ethereum staking, with Lido validators currently commanding 31.7% of staked Ether, according to Dune Analytics. The second-largest is Coinbase with 4.4%.
Ethereum researchers have warned that if Lido’s percentage exceeds 33%, it could threaten the network’s decentralization. Danny Ryan from the Ethereum Foundation, in a recent podcast appearance, stated that any single entity accumulating one-third of staked Ether represents a “systemic threat to Ethereum.” Ryan advocated for Lido to self-impose a 25% limit.
It is important to note that the opinions expressed in this article do not necessarily reflect the views of CriptoFácil.