Vitalik Buterin has warned that the large stakes that dominate Ethereum pose risks of centralization and transaction censorship. Proposed solutions include staking caps and inclusion lists to keep Ethereum decentralized and prevent value extraction.
In October, two organizations, Beaver and Titan, were responsible for creating nearly 90% of Ethereum’s blocks, raising concerns about centralization within the network. Ethereum co-founder Vitalik Buterin has sounded the alarm on this issue, warning that such control by large shareholders increases the risk of network attacks and transaction censorship.
Despite the recent update on Ethereum accumulation by CNF, which is expected to increase by around 20 million ETH in 2024, Buterin explained the current risks:
This dominance by large investors leads to an increased risk of 51% attacks, transaction censorship, and other crises. In addition to centralization risks, there are also value extraction risks. This means that a small group captures value that would otherwise go to Ethereum users.
Inclusion list and staking limits suggested as a solution
To address these centralization risks, Buterin proposed an inclusion list system in which block creation tasks are shared between proposers (stakers) and builders. In this system, proposers select transactions and builders influence their order, decentralizing the production of blocks. This solution is still under consideration as the Ethereum team considers the tradeoffs.
Another area of concern is staking, with 34 million ETH (about 30% of total supply) currently staked. Buterin warned that such high-value staking activity could lead to a single Liquid Staking Token (LST) dominating the market. To prevent this, the team is considering reducing staking rewards and capping the amount of ETH that can be staked to ensure a larger liquidity distribution.
Buterin emphasized that Ethereum is focused on keeping Ethereum decentralized by preventing value extraction by centralized actors. Following these updates, market sentiment towards Ethereum improved and ETH price gained momentum. However, the end result of these proposed solutions will determine the long-term health of the network.
As of today, Ethereum (ETH) is trading at $2,732.73, having soared 3.55% over the past day and 11.65% over the past week, according to data from CoinMarketCap.
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