Vitalik Buterin Warns Current Ethereum Staking Model Is a Threat to Its Future

Key Takeaways

• Vitalik Buterin warned that the current staking model poses significant centralization risks.
• In October, 88.7% of all blocks were produced by two block builders.
• Buterin suggested using an inclusion list model for block production.

In a stark warning to the Ethereum community, co-founder Vitalik Buterin has sounded the alarm on the growing threat of centralization in the network’s staking model.

Buterin’s concerns are centered around the increasing dominance of large stakers and the potential risks of a 51% attack, transaction censorship, and other crises.

Vitalik Buterin Warns of Ethereum Centralization Threat

The Ethereum founder highlighted that the issue lies in the fact that to become a solo validator on the Ethereum blockchain, one must stake a minimum of 32 ETH (approximately $87,844), a significant barrier to entry for smaller stakers.

As a result, large stakers have acquired a disproportionate number of validator nodes, leading to a concentration of power in the hands of a few.

According to Buterin, the current structure of Ethereum’s staking model has led to a situation where two block builders, Beaverbuild and Titan Builder, produced a staggering 88.7% of all blocks in October, sparking centralization concerns.

Buterin warned that the growing dominance of large stakers and the departure of small stakers to join large pools could spell doom for the Ethereum blockchain. The risks, he notes, have only increased over the past year.

The Ethereum founder has proposed several measures to mitigate these risks and promote a more decentralized block production process.

One solution he suggests is limiting the amount of Ether that can be staked, which would deter large players from trying to acquire more validator nodes.

Another solution he suggested is an inclusion list model, where proposers (stakers) and builders divide the work of creating blocks to prevent the dominance of large stakers.

A Decentralized Block Production Model

Ethereum currently uses the proposer-builder separation technique for block production, where builders create blocks for proposers to review and validate.

In this model, the most profitable block is selected. However, this system has also raised concerns about centralization.

According to Buterin, approximately 30% of the total ETH supply is currently staked, which provides a sufficient safeguard against 51% attacks.

However, if major stakeholders, or whales, continue to accumulate more ETH and the staking percentage approaches 100%, it could significantly exacerbate centralization risks and undermine the network’s decentralized nature.

Buterin’s proposed inclusive list system looks to solve this. Stakers would choose the transactions to be included in a block, while builders would determine the order.

Builders would be required to include all valid transactions proposed by the staker but would be able to rearrange them and add their own.

For example, a randomly chosen staker would create an inclusion list for all valid transactions, and the block builder would be required to include all of these transactions while having the flexibility to add their own.

Ethereum’s Two-Tier Staking System

Buterin also suggests introducing a two-tier staking system to counter the risks associated with large stakers.

The first tier would be a “risk-bearing” staking system, capped at 1/8 of all ETH, which would be subject to slashing (a process where a validator is removed from the network and a portion of their staked Ether is removed as collateral).

The second tier would be a “risk-free” staking system where anyone could participate. This would allow smaller stakers to join the network without the risk of losing their Ether.

A Call to Action

Buterin’s warnings highlight the need for urgent action to address the centralization risks in Ethereum’s staking model.

By introducing an inclusive list system and a two-tier staking system, the network can promote a more decentralized block production process and prevent the dominance of large stakers.

Buterin warns that failure to act could lead to a 51% attack, transaction censorship, and other crises.

Ethereum’s future hangs in the balance, and it remains to be seen whether the community will heed Buterin’s warnings and implement the necessary reforms to ensure the network’s continued decentralization and security.