Ethereum co-founder Vitalik Buterin wrote in a recent blog post that he wants to improve the decentralization of the Ethereum network by changing the penalty system.
And funny enough, he posted about it on Twitter After being asked by Elon Musk why he doesn't use the platform.
The Ethereum network uses a proof-of-stake consensus mechanism, and validators secure the network by staking their ETH. In exchange for processing transactions, validators earn rewards. However, if they accidentally or intentionally fail to do their job, they could be fined and lose some of their staked Ethereum.
Buterin's proposal addresses the issue of large stakers or pools that may control multiple validators from the same infrastructure, leading to the risk of correlated failures. As of this writing, Lido runs his largest ETH staking pool to date, according to the Dune Analytics dashboard. Lido accounts for over 302,000 validators, followed by Coinbase with another 142,000 validators.
Each validator requires 32 ETH (equivalent to $114,485.76 at the time of writing) to stake. However, pooled staking providers allow people to stake any amount of ETH and receive proportionally sized rewards (minus fees, of course).
“Large stakers, including both wealthy individuals and staking pools, could theoretically end up running many validators on the same internet connection and even on the same physical computer, which could lead to disproportionate “There will be many interrelated failures,” Buterin wrote. Therefore, he reasons, larger stakers and pools should be subject to higher penalties.
Buterin’s solution is to encourage physical decentralization by increasing the penalty for simultaneous failures between validators that are likely to be controlled by the same entity.
This is based on data analysis showing that validators in the same cluster are more likely to fail together compared to validators in different clusters. This system aims to discourage centralization of validator operations by implementing penalties based on the degree of correlation of failures.
The proposed penalty mechanism adjusts the severity of penalties based on the average rate of misauthentication, making it no longer economically viable for large stakers to run multiple validators on a shared infrastructure. Masu. Buterin wrote that he hopes his proposal will better balance economic incentives and encourage a more decentralized and resilient network.
But he was also quick to say that this probably isn't a perfect, ready-to-implement idea. This blog also highlights the need for further research on this topic in order to improve the fine system and effectively promote decentralization without unintended consequences.
