Ethereum co-founder Vitalik Buterin’s latest proposal on “The Scourge” about the future of Ethereum continues to generate reactions.
Ethereum (ETH) co-founder Vitalik Buterin recently announced the final part of his vision for the future of Ethereum, known as “The Scourge.”
The proposal targets two main issues: the increasing centralization of Ethereum block construction and the growing dominance of liquid staking providers.
Buterin's plan includes introducing a two-tier staking system, capping staker penalties at 12.5%, and giving proponents more control over trade selection.
The proposal comes after warnings from Ethereum researcher Toni Wahrstetter, who cited concerns about centralizing block generation before Buterin's announcement.
According to Wahrstätter, two builders, Titan Builder and Beaverbuild, have produced almost 88.7% of Ethereum blocks in the past two weeks.
This alarming centralization is due to the growth of private order flows, where certain decentralized applications sell exclusive access to transactions. This minimizes competition, narrows the transaction pool, and threatens decentralization.
Wahrstätter emphasized that although Ethereum has made progress in resisting censorship, this centralization could lead to deeper problems.
Without strong competition, builders will be incentivized to take more risks and the network may become unstable. According to Wahrstätter, these risks could be minimized by improving public access to order flow and fostering greater competition.
Industry reaction
Industry reaction has lagged behind Buterin's proposed solutions. Crypto Roundtable host Mario Raufal supported the proposal, especially the two-tier staking approach.
He believes this change could significantly shake up the dominance of large companies in block generation and transaction selection, and encourage a more decentralized environment.
However, not everyone agrees. Dr. Jasper, Rocket Pool's community advocate, expressed skepticism, particularly regarding Mr. Buterin's proposal to reduce end-of-life inflation.
Jasper believes this could lead to negative outcomes for solo stakers. He pointed out that large liquidity staking token providers like Lido and Coinbase will continue to grow even with yields as low as 0.7% if operating costs are minimal.
In contrast, solo stakers, who typically have higher fixed costs, will struggle to maintain profits below 0.8% per annum.
He predicts that solo stakers will be the first to exit as staking rewards decline, with LST providers continuing to make money even as yields approach a few percentage points.
