TLDR:
Vitalik Buterin highlighted centralization risks in Ethereum’s proof-of-stake system
Major concerns are block construction centralization and over-staking
Proposed solutions include inclusion lists and modifying staking rewards
Goals are to maintain decentralization and security as Ethereum scales
Plans to increase throughput to over 100,000 TPS using rollup technology
Vitalik Buterin, co-founder of Ethereum, recently outlined potential centralization risks in the network’s proof-of-stake (PoS) system and proposed solutions to maintain decentralization and security.
In a series of blog posts, Buterin identified key areas of concern and potential fixes as Ethereum continues to evolve.
A primary issue highlighted by Buterin is the centralization of block production. Recent data shows that just two entities, Beaver and Titan, were responsible for creating nearly 90% of Ethereum blocks in October. This level of concentration raises the risk of 51% attacks, transaction censorship, and other potential crises.
Buterin explained that larger actors can afford to run more sophisticated algorithms for maximum extractable value (MEV), giving them higher revenue per block compared to smaller participants. Over time, this economic advantage could push smaller stakers out of block production or into large staking pools, further centralizing the network.
To address block construction centralization, Buterin proposed implementing “inclusion lists.” This approach would divide responsibilities between proposers (stakers) who choose transactions and builders who determine transaction ordering. The goal is to level the playing field between large and small stakers in the block creation process.
Another area of concern is the potential for over-staking. Currently, about 30% of circulating Ethereum is staked.
Buterin warned that if this percentage rises dramatically, it could lead to further centralization as more token holders defer to large, centralized staking providers.
To mitigate over-staking risks, Buterin suggested modifying Ethereum’s issuance curve to decrease returns when staked ETH exceeds certain thresholds. This would help prevent the concentration of staking power among a small group of large holders.
Buterin also addressed Ethereum’s future scalability plans, dubbed “The Surge.” The roadmap aims to increase transaction throughput to over 100,000 transactions per second (TPS) using data availability sampling and rollup technology. These upgrades are designed to improve scalability while maintaining decentralization.
Key to these scalability improvements is reducing the amount of data each node must process. Buterin called for closer integration between Layer 1 and Layer 2 networks to create a unified, scalable Ethereum ecosystem.
While highlighting these challenges, Buterin emphasized the importance of preventing value extraction from users and limiting network centralization. The Ethereum team is exploring various approaches to address the identified risks, with the ultimate goal of strengthening the network’s long-term security and decentralization.
As the Ethereum community digests these proposals, the price of ETH has shown resilience. At the time of writing, ETH was trading around $2,700, below a key resistance level on its path to a potential $2,900 target.
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