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Ethereum co-founder Vitalik Buterin recently warned about the centralization of staking as “one of the biggest risks” to blockchain. In a blog post published on October 18, 2024, Buterin details the potential dangers and proposes a solution within the framework of a future “Scourge” network update.
Centralized staking: Ethereum’s big risk
Vitalik Buterin points out that staking centralization is “one of the biggest risks to Ethereum L1.” This phenomenon primarily manifests itself at two levels: building blocks and providing staking capital.
Currently, only two entities choose the content of approximately 88% of the Ethereum block, increasing the risk of transaction censorship.
To counter this trend, Buterin suggests several innovative approaches. One is to set up an encrypted memory pool to make it more difficult for block proposers to censor specific transactions.
Another proposed solution is the use of an inclusion list, where the staker suggests a list of transactions that the builder should include in the next block.
Toward reforming the staking system
Regarding the provision of staking capital, Buterin points out that 30% of Ethereum’s supply is currently staked. Although this percentage is sufficient to protect the network from a 51% attack, increasing it significantly may introduce risks such as weakening the slash effect and over-issuance of ether.
To address these issues, Ethereum's co-founders have proposed either limiting the amount of Ether that users can stake or implementing a two-tier staking system. This approach splits the staked Ether into two parts: a reducible part and a non-reducible part.
These considerations are part of a broader effort to balance pricing between Layer 1 and Layer 2 of the network while preparing for the next Pectra fork, expected in late 2024 or early 2025. The goal is to build a consistent Ethereum ecosystem that can accommodate increased data. Secure your traffic without compromising accessibility or decentralization.
In conclusion, Vitalik Buterin’s proposals to counter centralization of staking demonstrate Ethereum’s continued efforts to address the challenges of mass adoption. The successful implementation of these solutions is critical to maintaining Ethereum's position as the leading blockchain platform and ensuring sustainability in an ever-evolving cryptocurrency environment.
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