Lido Misses Out As Arbitrum Grants Vote Closes

Decentralization proponents are celebrating Arbitrum governance rejecting a proposal from Lido, the largest liquid staking provider, requesting a 4M ARB grant to fuel incentive programs.

A week-long vote concluded on Oct. 12, with 43.6% of delegated votes cast in favor of the proposal compared to 31.3% against and 25% abstaining — falling short of the 50% threshold needed to secure the grant.

“I am proud that Arbitrum delegates voted against incentives for Lido on their network,” tweeted Superphiz, organizer of the ETHStaker community. “This is a win for our future.”

“Delegates to Arbitrum have sent a resounding message,” said Evan Van Ness, who runs the Week In Ethereum newsletter. “Arbitrum votes against providing incentives to Lido… The Ethereum immune system is waking up.”

Lido was among 29 projects that applied for a share of 50M ARB ($40M) up for grabs as part of Arbitrum’s Short-Term Incentive Program (STIP). The funds are earmarked to fuel incentive programs designed to attract and bolster Arbitrum adoption, and cannot be converted into other assets.

Voting closed today, with governance delegates approving the majority of applications. GMX, a decentralized perpetuals protocol, received the largest allocation with 12M ARB, followed by the leverage DEX, Gains Network, with 7M ARB. Nearly 100 projects how now applied for STIP funding, with around 60% of applications passing.

Lido said it would use the requested ARB to incentivize stETH liquidity paired with ETH and stablecoins on Aribtrum-based decentralized exchanges. The project added that deeper liquidity could pave the way for native stETH minting on Arbitrum in the future.

Pushback

The pushback against Lido stems from its dominant control over staked Ethereum, with Lido’s validators currently commanding 31.7% of staked Ether, according to Dune Analytics. Coinbase is the second-largest with 4.4%.

Ethereum researchers warn that Lido could pose a threat to the network’s decentralization if the figure surpasses 33%.

In a recent appearance on the Web3 Builders podcast, Danny Ryan of the Ethereum Foundation said any singular entity amassing a third of Staked Ether poses “a systemic threat to Ethereum.”

Ryan noted that when Lido voted against limiting its staking dominance last year, the three largest LDO holders could have changed the outcome of the vote despite 99% of votes rejecting self-imposing limits. Ryan advocated that Lido self-limit at 25%.

“At a third, if someone served those three operators at Lido… and they say ‘shut it down’, then we have an issue with liveness,” Ryan said. “It’s where we begin to potentially have issues.”

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• Source: https://thedefiant.io/lido-misses-out-as-arbitrum-grants-vote-closes