Why Shared Security Models Inevitably Centralize Economic Power

Lido's ~30% market share creates systemic risk, demonstrating how pooled staking centralizes validator control. The protocol's DAO governance is dominated by a few whales, making it a de facto central point of failure.

• Key Problem: Staking-as-a-Service concentrates ~70% of all staked ETH in the top 5 providers.
• Key Consequence: The "Lido dominance" debate highlights the impossibility of credibly neutral, decentralized staking at scale.

The Interchain Security model, where the Cosmos Hub secures consumer chains, centralizes economic value and decision-making in the ATOM token. This creates a single point of political failure for dozens of sovereign chains.

• Key Problem: Security is a commodity, but governance over that security is not. The Hub becomes a political bottleneck.
• Key Consequence: Low adoption by consumer chains, as they reject ceding sovereignty for a marginal security premium.

By pooling ETH security for Actively Validated Services (AVS), EigenLayer creates a meta-validator set. This concentrates the power to choose and slash AVSs into the hands of the largest restakers and node operators.

• Key Problem: Capital efficiency is the product; validator centralization is the byproduct. The same top 5 staking providers dominate the operator set.
• Key Consequence: AVSs face a centralization trilemma: use EigenLayer (centralized security), bootstrap their own (weak security), or don't launch.

Parachains compete for a limited number of slots via DOT-denominated auctions, creating a capital-intensive barrier to entry. This centralizes slot ownership in well-funded projects and VC-backed entities.

• Key Problem: Shared security is gated by capital concentration, not technical merit. The auction model is a wealth filter.
• Key Consequence: The ecosystem fragments into "haves" (parachains) and "have-nots" (parathreads), stifling long-tail innovation.

Liquid staking tokens (LSTs) and restaking pools create a winner-take-most market. Capital flows to the largest, most trusted pool (e.g., Lido, EigenLayer), creating a single point of economic failure and governance capture.\n- $30B+ TVL in Lido stETH demonstrates the gravitational pull.\n- New chains must bid for security from this concentrated capital base.

Delegated Proof-of-Stake (DPoS) and restaking incentivize professionalization, pushing out small validators. The result is a cartel of ~100 entities (like Chorus One, Figment) controlling consensus across multiple chains.\n- Economies of scale in hardware and operations create insurmountable barriers to entry.\n- Cross-chain slashing via Interchain Security (ICS) or EigenLayer amplifies systemic risk.

Shared security models export the governance tokens and voter apathy of the hub (e.g., ATOM, ETH) to all consumer chains. This creates a political monoculture where a small group of whale voters dictates the rules for dozens of sovereign ecosystems.\n- Voting power follows token distribution, not chain-specific expertise.\n- Innovation is stifled by hub-centric upgrade cycles and risk aversion.

EigenLayer doesn't solve centralization; it financializes and multiplies it. The same ~$20B ETH stake can be simultaneously securing dozens of AVSs, creating a tightly-coupled, interconnected risk matrix. A failure in one service can cascade via slashing.\n- Capital efficiency is the Trojan horse for systemic fragility.\n- Operator set overlap means the same few entities are securing everything.

Rollups using a shared sequencer set (e.g., based on Espresso, Astria) or a shared DA layer (e.g., Celestia, EigenDA) outsource critical sovereignty. This recreates the L1 validator oligopoly problem at the sequencing/DA layer, becoming a bottleneck for censorship resistance and MEV capture.\n- Sequencer cartels can extract value across all rollups.\n- DA layer downtime halts every connected chain.

The counter-trend is sovereign rollups and app-specific chains with isolated validator sets. While sacrificing shared security's bootstrapping ease, they enforce true sovereignty, tailored economics, and isolated failure domains. Tools like Rollkit and the OP Stack make this feasible.\n- Security is a service, not an architecture.\n- Innovation happens at the chain level, not the hub level.