i upgrades has come at a cost to Ethereum as the network has become more centralized and the overall staking yield has fallen, JPMorgan said in a research report on Thursday.
Lido has been adding more node operators to contain the number of staked ether being controlled by any single operator, to address centralization concerns, the Wall Street bank noted. An added risk from the rise of liquid staking is rehypothecation, the bank said. This is when liquidity tokens are reused as collateral across numerous decentralized finance protocols at the same time.“Rehypothecation could then result in a cascade of liquidations if a staked asset drops sharply in value or is hacked or slashed due to malicious attack or a protocol error,” the note said.
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