Oluwapelumi Adejumo
20 October 2024, 19:30 GMT+0000

Daria Krasnova

In Brief
Vitalik Buterin, one of the co-founders of Ethereum, has been sharing his thoughts on how to improve the blockchain network's Proof-of-Stake (PoS) system. His latest essay is titled “Possible Futures of the Ethereum Protocol, Part 3: The Scourge.”

In this piece, Buterin emphasizes the need for Ethereum to adapt. He wants to maintain decentralization while also tackling security issues.

Tackling Ethereum Staking Centralization Risks
Buterin introduces the Scourge as a proposed upgrade. Its goal? To reduce the risk of centralization in Ethereum’s staking process. He points out that factors like block construction centralization, economic incentives, and the 32 ETH minimum staking requirement contribute to these risks. Plus, the hardware needed to participate makes it even harder for smaller players.

He states, “One of the biggest risks to the Ethereum L1 is proof-of-stake centralizing due to economic pressures. If there are economies of scale in participating in core proof-of-stake mechanisms, this would naturally lead to large stakers dominating, and small stakers dropping out to join large pools.”

To address this, Buterin suggests breaking down the block production process. This change would hand over the responsibility of transaction selection from builders to stakers. Builders would only need to organize transactions and add a few of their own.

He explains, “The leading solution is to break down the block production task further: we give the task of choosing transactions back to the proposer (i.e., a staker), and the builder can only choose the ordering and insert some transactions of their own. This is what inclusion lists seek to do.”

Buterin also discusses other solutions, like the Multiple Concurrent Proposers (MCP). These systems, such as BRAID, distribute the block production process among various entities. This setup lowers the entry barriers and makes it tough for any single entity to dominate staking.

Addressing Over-Staking Concerns
Buterin raises concerns about “over-staking” in Ethereum. Right now, about 30% of the total ETH supply is staked. He warns that if this number climbs too high, staking could feel mandatory for ETH holders. This might push more stakers toward centralized platforms.

To counter this, he suggests adjusting Ethereum’s issuance curve. This way, staking rewards would decrease if the total staked ETH exceeds a certain limit. This change would help prevent a small group of large stakers from gaining too much power over the network.

Buterin’s proposals in the Scourge phase show his commitment to keeping Ethereum decentralized as it grows. By tackling the centralization risks tied to both staking and block production, he aims to ensure the long-term security and accessibility of the Ethereum blockchain.