Why is Cardano more decentralized than Ethereum?

The Ethereum community is sounding the alarm. The amount of staked ETH on Lido is approaching the first of three critical thresholds at which Ethereum is more easily manipulated by an attacker. Protocols that offer Liquid staking derivatives (LSD) are a stratum for cartelization and induce significant risks to the Ethereum protocol and to the associated pooled capital.

Why doesn’t Cardano have the same problem? The simple answer is that it has liquid staking and users don’t need to use LSD protocols. The IOG team managed to design Ouroboros Proof-of-Stake in such a way that its decentralization increases over time. Economic incentives motivate users to spread the total stake over multiple block producers. Ethereum may get into a situation where it becomes economically viable to use Lido for profit maximization reasons. This will further reinforce the monopoly. If the critical threshold is crossed, block production may be halted when Lido collapses.


The quality of decentralization depends on small details in the PoS design. If stakeholders can delegate even a few ADA directly from the wallet and coins are liquid, decentralization flourishes. LSD tokens have a market value similar to ETH, but play no role in the Ethereum consensus. The centralization of ETH in Lido poses a serious risk.

This article was prepared by Cardanians with support from Cexplorer.

Read the article: https://cexplorer.io/article/why-is-cardano-more-decentralized-than-ethereum