Vitalik Buterin highlights risks and solutions in Ethereum's proof-of-stake system

Ethereum co-founder Vitalik Buterin outlined the major risks associated with Ethereum’s proof-of-stake (PoS) mechanism. A recent blog post titled “Future Potential for the Ethereum Protocol, Part 3: “The Tragedy””.

Buterin went on to explain that economic factors can lead to centralization that threatens network security. He outlined that as Ethereum continues to grow, more needs to be done to maintain it as a decentralized platform with strong security.

Vitalik Buterin highlights Ethereum POS risks and solutions

Buterin warned that Ethereum PoS could become concentrated over time, given the principle of economies of scale where large stakers outcompete smaller ones. This could potentially encourage smaller stakers to leave the process and join the larger staking pool. This level of centralization increases the likelihood of attacks and transaction blockage by 51%.

The Ethereum co-founder added that large network participants may be using complex algorithms to optimize block construction and capture a higher share of the revenue.

Such participants with more capital can take the risk of locked capital by introducing Liquid Staking Tokens (LST) and transfer that risk to other smaller participants You can also. Buterin emphasized that if these potential issues are not resolved, Ethereum’s decentralization and security could be compromised. Despite these concerns, analysts say the price of ETH could rise to all-time highs above the $3,000 resistance by the end of October.

Building blocks and staking capital: concerns

Buterin identified two key areas that are vulnerable to centralization: capital provision for boarding and staking. Larger actors can use better algorithms to extract maximum extractable value (MEV) per block and earn more revenue per block than smaller actors. This would create further incentives for centralization.

To reduce these risks, Buterin proposed measures based on the idea of decentralizing the actual construction of city blocks. He pointed to the need to use “committee participation lists” and other mechanisms to prevent centralization when forming blocs.

This helps small stakers to be on the same level playing field as big players in block construction.

Vitalik Buterin addresses Ethereum overstaking risks

Vitalik Buterin also highlighted the possibility of overstaking, which is another problem that can occur with ETH. Currently, around 30% of all ETH is staked, and Buterin noted in his response that if this percentage increases even more dramatically, it could lead to further centralization of ETH.

He pointed out that if the amount of ETH staking increases significantly, it will become an obligation rather than an option, and most ETH holders will end up voting their tokens through a centralized provider.

Buterin proposed several solutions to combat overstaking, including changing Ethereum's issuance curve so that returns decrease if the amount of staked ETH exceeds a certain level. I did. This ensures that there is no concentration of power where certain groups of people hold large amounts of staked ETH.

The future of Ethereum scalability: “Surge”

Vitalik Buterin also discussed the future of Ethereum in terms of scalability in another post titled “Future Possibilities for the Ethereum Protocol, Part 2: The Surge.” He outlined plans to increase Ethereum's transaction throughput to over 100,000 transactions per second (TPS) through data availability sampling and rollup techniques.

This phase is part of ETH's ongoing development roadmap and aims to maintain decentralization while dramatically increasing the network's capacity.

According to Buterin, these scalability upgrades reduce the amount of data each node must process, allowing the network to scale efficiently. He also called for tighter integration between Layer 1 and Layer 2 networks to create a unified Ethereum ecosystem that provides seamless and scalable solutions to users.