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A Flaw On Ethereum’s Geth Will Be Devastating For Lido Finance

A Rocket Pool advocate has warned of the potentially catastrophic consequences of a bug in Geth, a top Ethereum validator client. The analyst is concerned that over-reliance on the client, especially by top protocols, notably Lido Finance, poses a significant centralization risk that could “negatively impact reliability and stability.”

Over-Reliance On Ethereum’s Geth Is Very Risky

Geth is one of the top and first clients for Ethereum. Node operators can process and update the blockchain through this validator client, ensuring that all transactions are valid. What’s important to note is that Geth and similar clients play a critical role in Ethereum following the shift from a proof-of-work to a proof-of-stake system.

Users can delegate their coins through platforms like Lido Finance or Rocket Pool and receive a share of staking rewards. As it emerges, most Lido Finance validator nodes depend on Geth. 

Ethereum price trending downward on the daily chart | Source: ETHUSDT on Binance, TradingView
Ethereum price trending downward on the daily chart | Source: ETHUSDT on Binance, TradingView

Taking to X, the advocate notes that almost 80% of Lido Finance node operators rely on Geth as their go-to client. Other choice validator clients for Lido Finance include Nethermind and Besus. 

This concentration of power could lead to disastrous consequences, even leading to a fork, in the event of a critical bug in Geth.

Even so, looking at trends over the past quarters to March 2023, there have been decentralization attempts regarding Lido Finance node operators. To illustrate, Geth’s client share fell from around 80% in April 2021 to 76% in early 2023. Meanwhile, more Lido Finance node operators have been opting to use Nethermind in the past year, reading from its rapid share increase from 5.5% to around 12.8%.

Popular Ethereum validators among Lido Finance node operators | Source: Jasperthefriendlyghost.eth via X
Popular Ethereum validators among Lido Finance node operators | Source: Jasperthefriendlyghost.eth via X

Clients like Nethermind and Besu play a role similar to Geth in ensuring the network remains updated and secure. However, they offer different features and approaches to Ethereum node operation.

For instance, Nethermind is considered to be more flexible and has higher throughput with lower latency than Geth. Accordingly, by ensuring Lido Finance and other staking platforms diversify their validator clients, it could distribute the network’s workload and reduce concentration on Geth. 

Lido Finance Is The Liquid Staking King And Is Decentralizing

So far, DeFiLlama data shows that Lido Finance is the largest decentralized finance (DeFi) protocol by total value locked (TVL), managing over $22.4 billion worth of assets.

As a liquid staking protocol allowing ordinary users to partake in Ethereum block validation, the protocol is critical in ensuring the network remains secure.

Lido Finance TVL | Source: DeFiLlama
Lido Finance TVL | Source: DeFiLlama

The team introduced distributed validator technology (DVT) in October 2023 to ensure it becomes secure and decentralized. Through DVT, their validators can spread operations across multiple parties, effectively decentralizing. 

Feature image from Canva, chart from TradingView


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