Vitalik Buterin is developing a new way to decentralize Ethereum shares.
Ethereum founder Vitalik Buterin proposed a mechanism to encourage Ethereum's decentralization by penalizing related failures between validators.
Buterin released his thoughts on supporting decentralized staking on the Ethereum research platform on March 27.
He pointed out that if multiple verifiers controlled by a single actor fail together, they face greater penalties than if they fail independently.
“The theory is that if you're a single big actor, the mistakes you make are more likely to be repeated across all the ‘identities' you control,” he says.
Buterin noted that validators in a cluster, such as a stocking pool, are more likely to experience related failures — possibly due to shared infrastructure.
The proposal suggests penalizing verifiers in proportion to the difference in average failure rates. If multiple validators fail in a given slot, the penalty for each failure will be higher.
Simulations suggest that this approach could reduce the benefit of large Ethereum stakeholders more than smaller ones, as large entities are more likely to generate the rate of decline due to related failures.
Potential benefits of the proposal include encouraging decentralization by having a separate infrastructure for each validator and making sole staking more economically competitive than staking pools.
Buterin proposed other options, such as different penalty schemes, to reduce the average large validator's advantage over smaller validators and to test the impact of geographic and client decentralization.
He did not mention the possibility of deducting from 32 Ether (ETH) alone, which is currently equivalent to $111,500.
Related: 3 Reasons Why Ethereum's Market Cap Is Rising
Staking pools and custodial services like Lido remain popular as they allow stakeholders to participate with minimal ETH.
Lido currently has $34 billion worth of ETH shares, which is equivalent to 30% of its total supply.
Ethereum advocates and developers have previously warned against Lido's dominance and “cartelization” that could result in high profits compared to idle capital.
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