Lido, the reigning champion of Ethereum staking, is now facing some healthy competition. Enter Diva, a well-established protocol that aims to democratize staking even further, and it’s enticing Lido stakers with a unique offer.
If you’ve been in touch with the Ethereum community recently, you’ve probably heard the name “LIDO” echoing through the conversation. Lido Finance, a prominent staking pool, has managed to capture approximately 32 percent of all staked Ether, positioning itself near the pivotal one-third mark.
Unlike centralized exchanges such as Coinbase or Kraken, Lido operates as a decentralized pool, distributing deposited Ether to around 30 validators. However, the Lido DAO, largely influenced by a handful of significant LDO token holders, has raised some concerns, particularly regarding validator selection.
Ethereum developer Danny Ryan raised a pertinent question in a recent video, pondering the absence of a “Vampire attack.” Where are the other staking pools aggressively vying for market share, offering incentives for users to switch? Where are the formidable challengers? Why does Lido seem to hold a quasi-monopoly in the realm of liquid staking?
Diva Staking may just be the contender everyone has been waiting for. In fact, Diva recently acquired over 15,000 ETH in just a few weeks through what some are calling a “vampire attack,” likely drawing a significant portion from Lido. While it’s not an overwhelming figure, it’s a promising start.
Diva Staking vs. Lido Finance: A Clash of Titans
Diva Staking and Lido Finance both fall under the category of “liquid staking pools.” In both cases, users deposit their Ether and receive tokens that represent the staked Ether, subsequently earning interest on the staking income. For Lido, it’s stETH; for Diva, it’s divETH. The actual Ether is then distributed to nodes through their respective protocols, which in turn generate more Ether through staking.
This structure diminishes the influence of individual actors, though there’s always the potential for coordinated actions that could harm the network. While we’ve previously explored these risks with Lido, Diva claims to mitigate them effectively – and its name alone hints at its intentions.
Diva stands for “Distributed Validation,” a method that goes beyond merely distributing Ether deposits to a diverse set of validators, as Lido does. Diva divides validators into 16 nodes, with each node holding a “key share” representing a portion of the validator’s key. Through BLS signatures, this key is divided in such a way that two-thirds of the shares are required to create the signature needed for a validator to function. This means that up to five of the 16 nodes can fail simultaneously without affecting the system, as each validator necessitates the cooperation of at least eleven parties to exert control. These nodes form a peer-to-peer network to reach a two-thirds majority every few minutes.
This architecture offers several advantages. It enhances the network’s resilience through redundancy and requires more actors to collaborate in causing any potential harm. Furthermore, it lowers the threshold for individual stakers, from 32 to just one Ether, encouraging broader participation in Ethereum’s core infrastructure.
As of now, Diva boasts 814 validators across 352 nodes operated by 174 individuals, a promising sign for its early stages. In contrast, Lido relies on just 30 operators, subject to the goodwill of the three primary token holders in the DAO, which pales in comparison to Diva’s decentralized setup.
The Dual DAO: A Balancing Act
Diva also operates through a DAO, a Decentralized Autonomous Organization, governed by token-holder voting. However, Diva has learned valuable lessons from others, particularly Lido, to avoid the concentration of power in the hands of insiders and early investors.
Diva introduces a dual model featuring two tokens to prevent the consolidation of power seen in Lido. The primary token, DIVA, doesn’t grant direct voting rights but allows token holders to delegate their votes to another party, creating “Delegated DIVA Tokens” for voting. This separation of token ownership from voting helps in mitigating the influence of large token holders.
The DAO’s authority over the protocol is also limited compared to Lido. Its primary mandate is to “maintain staking through Diva as a public good,” with an additional responsibility to facilitate further development when necessary.
Whether this model proves more effective in keeping the power of significant stakeholders in check remains to be seen.
The Vampire Attack: Diva’s Play for Dominance
Diva is attempting to challenge Lido’s supremacy through a vampire attack, enticing early stakers to make the switch. In late September, Diva initiated an “Early Staker” giveaway. Users who deposit ETH or stETH into Diva receive DIVA tokens and an “Early POAP,” an NFT signifying their participation. It’s akin to receiving a medal for involvement.
Additionally, participants before October 22nd have the chance to win one of five premium access subscriptions to Rotki, a tool for cryptocurrency asset management and tax calculation.
This seemingly modest bonus was enough to draw over 16,500 Ether (approximately $25.6 million) in just two weeks. To date, Diva has received a total of 23,709 ETH, creating 23,709 divETH.
Diva’s journey is off to a strong start, but it’s essential to remember that despite the impressive figures, it still has a long way to go compared to Lido’s 8.83 million ETH. Diva has fired the first shot in the battle, but Lido has yet to feel the full force of the vampire attack.