Ethereum is nearing a major correction with Coinbase’s move, but is it enough? – DL News

Cryptocurrency exchange Coinbase has migrated half of its Ethereum validators to new software. This is a decision that could save the blockchain in the unlikely event of a catastrophic bug.

This is the latest victory in a two-month pressure campaign that persuaded some of Ethereum's largest companies to switch from Guess.

Half of Coinbase’s validators are now running on Nethermind’s software, the exchange announced Thursday.

This is welcome news for blockchain, which has faced increased competition and increased scrutiny from the Securities and Exchange Commission this year.

However, with limited publicly available data, it is not yet clear whether a potential crisis has been averted.

“Coinbase is probably the largest single node operator on the network, which is a big win, but it’s not enough,” said Jasper, a long-time anonymous contributor to the Liquid Staking Protocol Rocket Pool. Told. DL News.

Despite the much-touted upgrade on March 13, Ether has fallen behind other top cryptocurrencies this year as Bitcoin enjoys massive ETF-led inflows and Solana rides the boom in memecoin trading. is lagging behind.

Previously, all of Coinbase's validators ran on Geth, the software that dominates the execution client market for handling the deployment and execution of transactions and smart contracts on Ethereum.

Coinbase promised the change in February. The exchange said at the time that it also plans to start using Eligon software later this year.

In the eyes of some, a public awareness campaign is on the brink of saving Ethereum.

That's because Guess' market share may have fallen below a critical threshold.

If more than two-thirds of Etheruem validators are running a single execution client, a bug in that client could set off a chain of events that could lead to a catastrophic breakup of the chain. The result could be billions of dollars of Ether destroyed and a controversial debate. There is little precedent in the history of blockchain.

After Thursday's announcement, Guess controls just under two-thirds of the execution client market, according to some estimates.

Still, there are big holes in the data, and Guess may still control 73% of the market.

“If Coinbase just switches half of its validators, it could drop below that 66% threshold,” Jasper said. “But I'd rather get to a point where I'm like, 'Okay, even if I'm 15% wrong, I'm still okay.'” And we're not there yet. ”

supermajority risk

To prevent over-reliance on a single piece of software, Ethereum was designed to split in two if the client software used by more than two-thirds of Ethereum's validators goes offline.

Additionally, stakers operating a super-majority of clients will lose Ether.

Ethereum's community-run website explains: “Having a large number of independently developed and maintained clients is essential to the health of a decentralized network.”

Nevertheless, Guess has long dominated the market of execution clients that not only deploy and execute smart contracts, but also process transactions.

As of late January, 84% of validators were using Geth, according to estimates using data collected by pseudonymous developer Sonic.

That started changing soon after that.

That's because a pair of Geth's competitors, Besu and Nethermind, were hit by a bug that temporarily took them offline.

“When the first one went offline, everyone was like, 'Oh, this is a huge client-wide bug, what an anomaly,'” said Nixo Rokish, head of EthStaker, an educational resource for Ethereum stakers. said. DL News at that time.

“And then the second one falls and it starts to look like a domino falling. And if that third domino is Guess… if Guess falls within another month, that's a big deal. ”

That fear is understandable. Bugs have also been discovered in Guess.

In 2020, Optimism's developers intentionally triggered a Geth bug that had been patched months earlier, unaware that many validators had not updated their software since the fix. DeFi applications have gone offline. And in 2021, software developer Guido Vranken discovered a critical bug in his Geth, which was quickly patched.

However, Ethereum Foundation researcher Justin Drake previously said that the Guess bug has not yet been exploited by bad actors. DL News.

After the Nethermind bug on January 21st, several crypto influencers took to social media to call on organizations to retire Geth before it too suffers from the bug or is taken offline due to abuse.

promise

Since then, Geth's market share has plummeted as companies like Allnodes, P2P, and Ether.Fi announced switches to competing software.

But the data is unreliable.

This is based on the assumption that companies are honest about the software they use.

Additionally, only 56% of over 979,000 validators report the execution client they use.

Lido, a liquid staking protocol, is currently in the spotlight. Some people said the company's next quarterly report could show that the majority of risks have been avoided.

Meanwhile, some large companies, such as Binance, the world's largest cryptocurrency exchange, have remained silent about their use of execution clients.

“There is still a lot of work to be done on centralized exchanges,” Jasper said.

alex gilbert is DL NewsDeFi correspondent based in New York. Contact him at aleks@dlnews.com.