What’s troubling Ethereum ahead of the Merge?

With less than two days left until Ethereum transitions to a Proof-of-Stake system, all eyes are pointed at the Merge but many are still worried whether it will change the crypto market for the better.

According to the latest report from analytics company Nansen, the problems a PoS Ethereum will face aren’t dismissible. However, the company believes most concerns are largely unwarranted as Ethereum will weather the storm and emerge as a stronger, more resilient chain.

Merging into a more centralized system?

One of the most heated conversations around the Merge has been about the extent of centralization it will bring to Ethereum.

Nansen reports that around 80,000 unique addresses are set to participate in staking on Ethereum. And while the number looks high, looking at the landscape of intermediary staking providers shows that there is quite a bit of centralization taking place.

In total, 11.3% of the ETH supply has been staked, or 13.5 million ETH. Lido, a decentralized liquid staking protocol, accounts for 31% of the total staked ETH. Coinbase, Kraken, and Binance have around 30% of the staked ETH.

Exchanges like Coinbase, Kraken, and Binance are required to comply with regulations in the jurisdictions they operate in. This is why the largest part of the market isn’t focused on the centralization issues that might arise from them, but rather on the centralization that can arise from decentralized services like Lido.

Zooming in on the liquid staking solution market, Lido’s share becomes even higher. According to Nansen, Lido accounts for 47% of liquid-staked ETH, while Coinbase, Kraken, and Binance together account for 45%. Zooming into liquid staking providers excluding centralized exchanges shows the extent of Lido’s dominance — it accounts for 91% of the liquid staking market.

Lido is a service provider governed by the Lido DAO, set up to allow multiple validator sets. The structure…