The Diva team announced that it is ending work on its decentralized Ethereum staking protocol and has dropped plans for a mainnet launch after its funding ran out in mid-2024. The decision means Early Staker Vault depositors no longer need to wait for the launch and can withdraw through Enzyme, while the developers said they could not justify risking users’ funds without further security reviews and resources.

Three Ethereum contributors continued working without pay after the project exhausted its funding, according to the developers. They aimed to provide a way to participate in ETH staking without concentrating control of validator keys among a few centralized players.

Diva went live on the Hoodi testnet in early summer and did not experience an outage during four months of operation, the developers said. However, no major player agreed to assist with the launch, and the team lacked the resources to conduct additional audits and provide continuing support for the complex protocol.

The developers said artificial intelligence helped them complete the protocol but also made it easier to identify vulnerabilities. Without more resources and reviews, the team did not consider a launch to be a justified risk to users’ funds.

Liquid staking demand shifts

The team also attributed the shutdown to changes in the liquid staking market. Before the Shapella upgrade, liquid staking tokens were the primary way to obtain liquidity from staked Ethereum. Demand changed after withdrawals became possible and arbitrage developed between staking and decentralized exchanges, according to the developers.

Interest in restaking later revived some demand briefly, but the team said restaking did not receive sufficient validation and eventually faded.

Diva also cited changes in the distribution of staked Ethereum. When the project began, Lido controlled nearly one-third of all staked Ethereum, prompting centralization concerns. The developers said Lido’s share has since fallen to about 21%.

At the same time, a substantial share of new staking has moved to large centralized companies. By the end of June, BitMine controlled 11.5% of staked Ethereum, Coinbase held 10.9% and Binance accounted for 7.9%, according to figures cited by the developers. Together, the three companies controlled about 30%.

The developers said industry priorities had also shifted. Market participants previously placed greater emphasis on decentralization and client diversity, but regulatory compliance, exchange-traded funds, regulation and the identification of ultimate beneficial owners now play a growing role.

According to the Diva team, those changes favor large companies and make it more difficult for decentralized protocols to compete. The developers nevertheless said participation by individual stakers remains important to Ethereum’s decentralization.

Project winds down

The team thanked testnet participants, the Ethereum community, investors and employees who supported Diva. It also said two team members were open to new professional opportunities.

The developers said they would have preferred to announce a mainnet launch but chose instead to wind down the project rather than risk users’ funds.

Source: Incrypted