Coinbase’s Ethereum staking dominance risks overcentralization: Execs
Coinbase’s emergence as the Ethereum network’s largest node operator raises concerns about network centralization that could worsen as institutional adoption accelerates, industry executives told Cointelegraph.
On March 19, Coinbase published a report disclosing that the US cryptocurrency exchange controlled more than 11% of staked Ether (ETH), more than any other Ethereum node operator.
According to Karan Sirdesai, CEO of Web3 startup Mira Network, Coinbase’s growing dominance highlights “a systemic issue in Ethereum’s staking architecture.”
“We’re creating a system where a handful of major players control an outsized portion of network security, undermining the core promise of decentralization,” Sirdesai told Cointelegraph.
According to the report, Coinbase controlled 3.84 million ETH staked to 120,000 validators, representing 11.42% of staked Ether as of March 4.
Liquid staking protocol Lido controls a larger share of staked Ether overall — approximately 9.4 million ETH, according to Lido’s website.
However, Lido’s staked Ether is distributed across dozens of independent node operators, Anthony Sassano, host of The Daily Gwei, said in a March 19 post on the X platform.
To limit risks, Coinbase spreads staking operations across five countries and employs multiple cloud providers, Ethereum clients, and relays, according to its report. “Diversification at the network level and the overall health of the network is always a priority for us. That’s why we periodically check network distribution,” the exchange said.
Coinbase is the largest Ethereum node operator. Source: Coinbase
Related: Ether ETFs poised to surge in 2025, analysts say
Impending centralization risks
Ethereum’s network concentration could worsen if US exchange-traded funds (ETFs) are permitted to begin staking — a priority for asset managers such as BlackRock.
Coinbase is the largest custodian for US crypto ETFs and holds ETH on behalf of eight of the nine US spot Ether funds, the exchange said in January.
“This type of network consolidation brings with it increased risk of censorship and reduced network resilience,” Temujin Louie, CEO of Wanchain, a blockchain interoperability protocol, told Cointelegraph.
For instance, high staking concentrations “represent potential points of regulatory pressure… [and] these large staking entities will likely prioritize regulatory adherence over network censorship resistance when faced with difficult choices,” Sirdesai said.
Meanwhile, new US regulatory guidance allowing banks to act as validators for blockchain networks adds to centralization risks, several crypto executives said.
“If too much stake consolidates under regulated entities like Coinbase and US banks, Ethereum will become more like traditional financial systems,” Louie said.
Conversely, more institutional validators could actually improve staking concentrations. Cryptocurrency exchange Robinhood is especially well positioned to check Coinbase’s staking dominance, according to Sirdesai.
Robinhood already has “the crypto infrastructure, user base, and technical capabilities to move into staking rapidly. They could realistically challenge Coinbase’s position faster than any traditional bank,” Sirdesai said.
Magazine: Ethereum L2s will be interoperable ‘within months’ — Complete guide
At a press conference today in which Reform UK announced the Tory police and crime commissioner for Leicestershire was joining their ranks, as well as former prison governor Vanessa Frake, I asked Nigel Farage a simple question.
But his answer wasn’t what I expected.
I asked the Reform UK leader if the six-week campaign on law and order, with the tagline “Britain is Lawless”, was in fact project fear scaring people into voting for his party.
He utterly rejected that claim and responded to me saying: “No, they are afraid. They are afraid. I dare you, I dare you to walk through the West End of London after 9 o’clock of an evening wearing jewellery. You wouldn’t do it. You know that I’m right. You wouldn’t do it.”
I am not afraid to walk in the West End of London after 9pm wearing jewellery.
I have done it many times before and will continue to do so… but perhaps that is because I do not own a Rolex.
However, just because Farage is wrong on that point, doesn’t mean he isn’t tapping into other legitimate fears across the country.
Snatch theft does worry me, hence why I now have a phone case with a strap attached to it that I can put around my body.
And I worry about knife crime in my area and what the impact could be if I were to have children – on the weekend someone was stabbed to death a stone’s throw from my house.
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Farage ‘not mincing his words’
However, if we look at the statistics, it is invariably a more nuanced picture than Farage or social media might have us believe.
According to police reports, thefts from a person in London are almost five times the national average, and they’ve been going up since the pandemic.
And the Office for National Statistics (ONS) also notes that thefts outside of the home, eg phone snatching, has increased.
However, possession of weapons has fallen in London by 29% over the last three years.
And according to the ONS, crime in England and Wales is 30% lower than in 2015, and 76% lower than 1995.
And it is a similar picture for violent crime.
In short, am I right to be more worried that snatch theft and knife crime in London is increasing? Yes, and no.
But Nigel Farage is tapping into voters’ emotions – their feelings that the country is broken. It’s a picture the Conservative Party helped to create and the Labour Party happily painted to great effect during the general election campaign of 2024.
And the more politicians of all colours tell voters that “the system is broken”, the more voters might start to believe them.
That is what Nigel Farage is banking on.
Profit-taking broke a 15-week winning streak of global cryptocurrency ETPs last week after hawkish remarks that followed last week’s US Fed rate decision.
ECB Executive Board member Piero Cipollone said that a digital euro will not replace physical money but complement it to preserve payment autonomy.
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