Buterin suggests ways to combat Ethereum Staking Centralization

Ethereum founder Vitalik Buterin continues his week-long intervention on how to further improve the blockchain network's proof-of-concept (PoS) system, titled “The Future of the Ethereum Protocol, Part 3: The Scourge.”

In this post, Buterin discusses how Ethereum needs to improve to maintain decentralization while addressing security concerns.

Solving Ethereum Staking Centralization Concerns

Buterin pointed out that the script is an update intended to reduce the risk of manipulation in Ethereum's stock process. He explained that factors such as building decentralization, economic incentives and the minimum amount of 32 ETH contributed to these risks. In addition, the hardware requirements to participate further strengthen the problem.

“One of the biggest risks for Ethereum L1 is the centralization of proof of stake due to economic pressures. If there are economies of scale to participate in proof-of-stake strategies, this will naturally lead to large stakeholders dominating and smaller stakeholders joining larger pools,” Buterin wrote.

Buterin's solution in the Scourge chapter is to dismantle the block production process. This shifts the responsibility for transaction selection from builders to shareholders, leaving builders with only the task of organizing transactions and then some.

Read more: An in-depth look at the Ethereum network

The leading solution is to break down the block production task further: we delegate the task of selecting transactions to the proposer (i.e. the stakeholder) and the developer can only select the order and insert some transactions. That's what listings want to do,” said the Ethereum founder.

Buterin discussed alternative solutions such as Multiple Concurrent Proposers (MCP), which introduces systems such as BRAID. According to him, MCP plans to distribute the block manufacturing process to different entities. This lowers the barrier to participation and makes it difficult for any single party to control the stake.

Resolving overcrowding

Buterin is also concerned about the risk of “oversaturation” in the Ethereum network. It currently accounts for around 30% of the total ETH supply. Buterin warned that if this figure is too high, ETH staking could become a near-compulsory obligation for ETH holders, driving more stakeholders to centralized platforms.

To counter this, Buterin proposed that Ethereum's extraction curve be adjusted. In this way, if the total amount of ETH per share exceeds a certain limit, the share profit amount will be reduced. This adjustment prevents large components from having too much influence on the network.

Read more: Staking Crypto: How to Stake Coins and Increase Your Earnings

In conclusion, Buterin's proposal reflects the focus of the Scourge chapter when considering Ethereum's decentralization. It aims to maintain the long-term security and openness of the Ethereum blockchain by addressing the centralization concerns of both staking and block production.