Vitalik Buterin Suggests New Way To Decentralize Ethereum Staking
Ethereum staking has a looming centralization problem – but the network’s co-founder Vitalik Buterin proposed a new way to address the issue on Tuesday.
In a blog post, Buterin suggested modifying the penalty system for Ethereum validators by increasing the cost of colluded misbehavior.
Specifically, the method would impose large penalties on validators who misbehave – even accidentally – if a large share of separately staked ETH misbehaves simultaneously.
“The theory is that if you are a single large actor, any mistakes that you make would be more likely to be replicated across all “identities” that you control, even if you split your coins up among many nominally separate accounts,” he wrote.
In September 2022, Ethereum switched to a proof-of-stake consensus mechanism, which lets users earn a yield on their ETH by locking their coins within the protocol. It also places control of block validation and transaction processing in the hands of those who hold the most ETH.
That includes centralized exchanges and staking providers like Lido, Coinbase, and Binance, which offer services pooling smaller investors’ ETH together to stake on their behalf. Even asset managers like Fidelity are looking to use some of users’ assets for staking purposes.
JUST IN: $4.5 trillion asset manager Fidelity files S-1 form for Spot Ethereum ETF with staking included. pic.twitter.com/KHNTt02qld
— Watcher.Guru (@WatcherGuru) March 27, 2024
This has raised community concerns around potential collusion among large Ethereum validators to launch a hostile takeover of the network – especially if compelled by the government. JPMorgan, for example, noted in October that the Merge and Shanghai upgrades have made Ethereum more centralized.
While large Ethereum
