In a recent blog post, Ethereum co-creator Vitalik Buterin raised urgent concerns about the growing centralization of Ethereum’s block production and staking processes, particularly through the upcoming “Scourge” phase of Ethereum’s technical roadmap. With alarming statistics indicating that just two entities were responsible for building a staggering 88% of Ethereum blocks in early October, Buterin argues that the current landscape poses serious risks for the network’s integrity and user experience.
The Centralization Challenge
Buterin emphasized that the current state of staking centralization could lead to increased risks of transaction censorship and other crises. He pointed out that 30% of all Ether (ETH), valued at approximately $2,732.34, is already staked, a figure that Buterin believes sufficiently safeguards Ethereum against 51% attacks. However, he warns that if nearly all Ether were staked, it could create additional vulnerabilities, rendering staking less profitable and imposing more obligations on Ether holders.
The crux of the issue lies in the economies of scale within staking pools. Smaller pools are increasingly migrating to larger, more lucrative pools, exacerbating centralization. This trend not only diminishes the diversity of staking entities but also raises the stakes for Ethereum’s users, as a few players could dominate the ecosystem.
Recommendations for Improvement
To counteract these threats, Buterin proposed several innovative solutions. One of the key recommendations includes capping the amount of Ether a user can stake and limiting staking penalties to 12.5% of staked Ether. This could be accomplished through a two-tier staking model that differentiates between “risk-bearing” (slashable) and “risk-free” (unslashable) staking.
Buterin’s recommendations extend to the mechanics of block production itself. Currently, Ethereum employs a proposer-builder separation (PBS) model, where builders create blocks that proposers review. This system, while efficient, has inadvertently contributed to centralization, with specialized tasks being concentrated among a few actors.
Addressing Block Production Centralization
To address the problem of block production centralization, Buterin proposed a “fork-choice-enforced inclusion lists” model, which would return the power of transaction selection to the proposer or staker. In this model, builders would merely determine the order of transactions and insert their own, reducing the potential for market manipulation and transaction delays.
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An alternative solution, dubbed “BRAID,” seeks to decentralize block production by distributing the process among multiple actors. This approach would allow participants with moderate sophistication to maximize their revenue, thereby diversifying the ecosystem and mitigating the risks associated with centralized control.
Vitalik Buterin’s insights into Ethereum’s staking and block production centralization highlight a pressing need for reform within the network. As Ethereum continues to evolve, addressing these centralization challenges will be crucial for maintaining its security and user experience. By implementing his proposed solutions, Ethereum could not only enhance its resilience against potential threats but also foster a more equitable staking environment for its diverse community of users.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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