Ethereum co-founder Vitalik Buterin has announced a new “Rainbow Staking” framework that could help decentralize control of the protocol by the network’s biggest players.
Vitalik to centralize ETH staking at ETHTaipei 2024
Speaking at the ETH Taipei 2024 event on Wednesday, the renowned developer highlighted the over-concentration of ETH staking supply by centralized providers, including government-regulated exchanges like Coinbase and Binance.
Vitalik said that while these staking providers have not colluded for any nefarious purposes so far, there remains a long-term risk that these entities will strike back.
“We have come to rely heavily on 'social pressure + virtue,'” the co-founder said, according to a translated report by Chinese media outlet ABMedia Crypto.
“How inevitable is this?” he asked. “If it is unavoidable, we need to be clearer about whether we rely on incentives or social pressure and virtue, rather than relying too heavily on the latter.”
Vitalik continued to discuss the centralization risks of ETH staking on ETH Taipei, highlighting that the likes of LIDO COINBASE BINANCE have an excessive share, and the conceptual framework that allows protocol service providers. Introduced the idea of “Rainbow Staking''. pic.twitter.com/rfFlcxNzyc
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ETH allows solo staking without a third-party provider, but you will need at least 32 ETH to participate.
This minimum was originally set to avoid overburdening the blockchain by small stakers and hopefully avoid excessive ETH requirements.
However, that minimum amount currently equates to $112,000, and economic and technical barriers to entry have led to a large number of “lazy ETH holders” delegating tasks to large third parties.
These groups also offer “liquid staking,” a service that rewards stakers with ETH-pegged tokens that can be redeemed for locked ETH.
According to blockchain data, approximately 42 million ETH worth $145 billion is currently staked on Ethereum.
What is Rainbow Staking?
To solve this problem, the “Rainbow Staking” framework allows individual and professional staking providers to access differentiated staking tiers depending on their needs.
According to Ethereum's official blog, one example could be to distinguish between heavy (slashable) and light (partial/non-slashable) clients and separate the roles played by each service provider.
“This allows a differentiated class of service providers to be most effective in each service category, rather than lumping everything under a single umbrella of expectations and demanding everything from everyone. ” reads the blog post.
Rainbow Staking also distinguishes between “capital allocators” and “service operators,” separating the role of placing economic stakes to secure the network from the role of actual block validation.
Last month, Binance Labs backed Babylon, a team working to help Bitcoin holders earn BTC staking yield from other networks, potentially including Ethereum.
