The crypto world is no stranger to bold moves by influential figures, and Arthur Hayes — co-founder of BitMEX and seasoned trader — recently made one that caught many off guard. After holding $LDO (Lido Finance’s native token) for months, Hayes revealed he had sold his entire position at a slight loss. Given his long-standing bullish stance on Ethereum and the Liquid Staking Derivatives (LSD) sector, this decision raised eyebrows.
In a recent blog post, Hayes provided a clear and compelling rationale behind his exit. This article explores his reasoning, analyzes the evolving landscape of ETH staking, and highlights the next generation of decentralized infrastructure poised to reshape the future of blockchain validation.
The Rise and Risk of Liquid Staking
👉 Discover how the next wave of Ethereum staking is redefining control and security.
Liquid staking has become one of the most transformative trends in the Ethereum ecosystem. Protocols like Lido Finance allow users to stake ETH and receive liquid tokens (e.g., stETH) in return, which can be used across DeFi for yield generation while still earning staking rewards.
This innovation solved a major liquidity problem pre-Shapella upgrade, where staked ETH was effectively locked. However, as Arthur Hayes points out, convenience came at a cost — centralization risk.
Despite being labeled “decentralized,” Lido relies heavily on a small set of trusted node operators. These entities generate and control critical cryptographic keys, including withdrawal credentials and BLS keys. Validators don’t own their private keys; instead, they depend on node operators to act honestly during withdrawals — especially after Shapella enabled unstaking.
Hayes notes:
“You’re not just giving up your keys — you’re transferring most of the risk to yourself for a 4–6% yield.”
This model mirrors past failures in CeFi and even compromised cross-chain bridges like Wormhole, where central points of failure led to catastrophic losses.
Shapella Upgrade: A Turning Point for ETH Staking
The Shapella upgrade (a combination of Shanghai and Capella) marked a pivotal moment in Ethereum’s history. For the first time, users could withdraw their staked ETH and accrued rewards. With over 18 million ETH (around 15% of circulating supply) now eligible for withdrawal, the power dynamic shifted dramatically.
This newfound freedom allows stakers to vote with their capital — moving funds from centralized or semi-centralized protocols to more secure, non-custodial alternatives. As Hayes emphasizes, Lido, which controls roughly 75% of LSD-locked ETH and about 30% of total staked ETH, now faces existential pressure.
Why? Because trust-based models are no longer necessary — true non-custodial staking is finally viable.
The Flawed Foundation of Lido’s Model
Lido’s architecture depends on node operators voluntarily executing withdrawals. There's no automated or enforced mechanism ensuring they will do so. If a regulatory crackdown occurs, or if operators decide not to cooperate, users could face delays or even denial of access to their assets.
Moreover:
- Node operators generate the keys — not the users.
- Redemption is discretionary, not guaranteed.
- The protocol lacks built-in mechanisms to punish malicious behavior effectively.
As Hayes puts it:
“It’s a ticking time bomb.”
While Lido played a crucial role in advancing liquid staking during Ethereum’s early PoS phase, its design prioritized speed over decentralization — a trade-off that may no longer be acceptable in a post-Shapella world.
Maelstrom Fund’s Vision: Investing in True Decentralization
Hayes launched Maelstrom Fund, his personal crypto family office, in late 2022. Through this fund, he began backing projects that address core weaknesses in current staking infrastructure — particularly those reducing reliance on trusted intermediaries.
Two key investments stand out:
1. Obol Labs – Enabling Distributed Validation
Obol’s Distributed Validator Technology (DVT) splits validator keys across multiple independent node operators. This creates a “multisig” validator that remains resilient even if some nodes fail or act maliciously.
DVT doesn’t compete directly with Lido or Coinbase — instead, it enhances them by removing single points of failure. Major protocols are already integrating DVT to improve security and decentralization.
2. ether.fi – Building Non-Custodial LSD
Unlike Lido, ether.fi ensures users generate and control their own private keys from day one. They can initiate withdrawals at any time without relying on third-party operators.
This fulfills the original crypto ethos:
“Not your keys, not your crypto.”
By enabling full user sovereignty over staked assets, ether.fi represents the next evolutionary step in liquid staking — one where security and decentralization aren’t sacrificed for convenience.
👉 See what’s next in decentralized finance with cutting-edge staking innovations.
Why Arthur Hayes Sold $LDO
Despite previously expressing optimism about Ethereum’s merge and LSD growth, Hayes’ decision to sell $LDO was rooted in long-term conviction — not short-term speculation.
His core concern?
Lido’s insufficient decentralization makes it vulnerable once users realize safer alternatives exist.
With Shapella live and new infrastructure emerging, stakers no longer need to compromise. Projects like Obol and ether.fi offer scalable, trustless solutions that align with the foundational principles of blockchain technology.
Hayes didn’t sell because he turned bearish on LSD — he sold because he’s bullish on the future of truly decentralized validation.
Frequently Asked Questions (FAQ)
Q: Did Arthur Hayes profit from his $LDO investment?
A: His average purchase price was around $2.35–$2.53 per $LDO. He sold at $2.42, meaning he either broke even or realized a small gain/loss depending on exact cost basis.
Q: Is Lido unsafe now that withdrawals are enabled?
A: Not immediately unsafe, but its reliance on trusted node operators introduces counterparty risk that wasn't testable before Shapella. The first large-scale withdrawal process will be closely watched.
Q: What are the risks of using centralized staking services like Coinbase?
A: These platforms hold your withdrawal credentials and control key generation. In case of regulatory action or platform failure, access to funds could be delayed or blocked.
Q: How does DVT improve staking security?
A: By distributing validator responsibilities across multiple parties, DVT eliminates single points of failure and increases network resilience against outages or attacks.
Q: Can I switch from Lido to a non-custodial protocol easily?
A: Yes. Post-Shapella, you can withdraw stETH and redeploy ETH into protocols like ether.fi or Rocket Pool that offer greater control and transparency.
Q: Will Lido become obsolete?
A: Unlikely in the short term due to its dominant market share and liquidity. However, its long-term relevance depends on how quickly it can adopt more decentralized architectures like DVT.
The era of compromising security for yield is ending. With tools like DVT and non-custodial LSD protocols gaining traction, the future belongs to systems where users retain full control — aligning technological progress with crypto’s original promise.
👉 Stay ahead of the curve with insights into the next evolution of Ethereum staking.