- Ethereum’s
daddyco-founder Vitalik Buterin has addressed the blockchain’s “biggest risk” – centralisation. - According to Buterin, approximately 80% of all transactions on Ether are validated or affected by just two actors.
- The programmer’s most recent blog post assesses several ways to address growing centralisation, including placing staking limits and creating encrypted mempools.
- Despite the perceived issues, Ethereum has grown 11.2% in just the past week.
With the crypto market back in the green, Ethereum has been one of the biggest winners over the past week. Despite many in the community believing Ether’s had an up-and-down year, the coin is still up 70% over the past 12 months, topped off by a near 12% weekly increase.
But even with sentiment turning bullish, Ethereum has several issues to address.
The DeFi giant’s co-creator and industry figurehead, Vitalik Buterin, regularly checks in on the protocol to impart his wisdom and solve some of these problems. In his most recent blog post, Buterin outlines Ethereum’s biggest existential threat, and a potential solution.
Welcome to the Scourge.
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Ethereum Current Validator Structure Dominated by a Select Few
Buterin’s post puts Ethereum’s largest threat quite simply.
Proof-of-stake centralizing due to economic pressures.
Vitalik ButerinBasically, the coin’s proof-of-stake model relies on validators to lock up a portion of their ETH in exchange for finalising transactions and receiving a reward. However, the economic requirement to run your own node on Ether is pretty hefty – about AU $130k at the time of writing.
So what ends up happening is large actors – those who can afford to run a node – soaking up all the delegate votes and getting a bigger slice of the validation pie than a decentralised protocol would ideally provide.
This leads to higher risk of 51% attacks, transaction censorship, and other crises…There are also risks of value extraction: a small group capturing value that would otherwise go to Ethereum’s users.
Vitalik ButerinAccording to Buterin, just “two actors [are responsible for] choosing the contents of roughly 88% of Ethereum blocks”.
The Scourge Proposes Encrypted Mempools and Staking Limits
Buterin proposes a possible future solution to this issue: The Scourge.
The proposal’s key goals are twofold:
- “Minimize centralization risks at Ethereum’s staking layer.”
- “Minimize risks of excessive value extraction from users.”
Buterin is strong on solving the maximal extractable value (MEV) issue, where a select few validators employ several DeFi strategies to increase their yield.
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In particular, with growing centralisation among operators on the Eth network, it could see blocks with the greatest financial incentive prioritised, while others are put to the wayside or even censored.
To combat this, The Scourge suggests implementing encrypted “mempools” (pending Ethereum blocks) that reduce validators’ ability to censor transactions while altering the block production process.
Additionally, Buterin believes creating a two-tiered staking approach could help remove the inevitable centralisation that comes with lower-net-worth users delegating their Ether tokens to liquid staking protocols.
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