Lido Finance staking service will implement distributed validator technology.

Lido will adopt Distributed Verifier Technology and begin to explore a scoring system that allows anyone to be a validator on Lido without permission, giving stETH holders the power to veto any decision made. https://t.co/jqYVyrX29w

— Wu Blockchain (@WuBlockchain) April 15, 2022

There are also plans to develop a scoring system that would allow anyone to become a Lido validator without permission.

The initiative is implemented as part of its mission to reduce barriers to staking Ethereum 2.0 as well as increase the decentralization and security of the network.

According to Dune Analytics, 75% of new members have come from Lido Finance in the last 30 days. Such dynamics caused fears in the growth of its centralization.

21 validators took part in the project. The share of each in staking is less than 2% of the total coins. Lido Finance plans to reduce this figure to 1%.

The list of validators is constantly updated by experts to minimize risks for users.

The criteria are:

• diversification by geography and jurisdiction;
• lack of physical and legal connection between validators;
• use of own nodes;
• distribution between own and cloud infrastructure;
• application of industry best practices in security and key management;
• the direct relationship between the financial results of operators and the popularity of the service;
• Long-term alignment with the success of Ethereum and the decentralized economy.

This approach is not without its drawbacks and is perceived as a temporary measure. Lido Finance aims to improve it by reducing barriers to node operators and creating incentives to encourage “good behavior” and minimize risks for management.

The technology of distributed validators will unify the latter in independent committees. The structures will begin to jointly recommend and approve blocks, which will significantly reduce the risk of ineffective or incorrect behavior of one of the participants.

The step will now allow validators detected as “untrusted” to connect to the service. They will directly contribute to the decentralization of the group without posing a risk to Lido or Ethereum participants.

The second improvement is to create a node operator score, which is a set of metrics. The resulting figure will affect the wage distribution.

Introducing this innovation will help improve their performance as well as move away from the existing binary approach (trusted and untrusted providers).

The project aims to improve governance within the DAO. In particular, it is planned to introduce new mechanisms that prevent unauthorized changes to Lido. These include temporary lockdowns and veto power to the majority of stETH holders.

With a TVL of $10.2 billion, Lido ranks fourth among Ethereum-based DeFi protocols, according to DeFi Llama. Last month, the indicator grew by 40.3%, while for the ecosystem as a whole – 8.5%.

Recall that Andreessen Horowitz invested $70 million in Lido Finance.