Crypto: Vitalik Buterin Reveals The Flaws Of Ethereum Staking

Vitalik Buterin, co-founder of Ethereum, recently sounded the alarm on what he considers “one of the biggest risks” to the blockchain: the centralization of staking. In a blog post published on October 18, 2024, Buterin details the potential dangers and proposes solutions within the framework of the future “Scourge” network update.

The Centralization of Staking: A Major Risk for Ethereum

Vitalik Buterin identifies the centralization of staking as “one of the biggest risks to Ethereum L1.” This phenomenon primarily manifests at two levels: block construction and staking capital provision.

Currently, only two entities choose the content of about 88% of Ethereum blocks, which increases the risk of transaction censorship.

To counter this trend, Buterin proposes several innovative approaches. One includes setting up an encrypted mempool, making it more difficult for block proposers to censor specific transactions.

Another proposed solution is the use of inclusion lists, where stakers would propose a list of transactions that builders should include in the next block.

Towards a Reform of the Staking System

Regarding staking capital provision, Buterin notes that 30% of Ethereum’s supply is currently staked. Although this percentage is sufficient to protect the network against 51% attacks, a significant increase could lead to risks, including a weakening of the slashing effect and excessive Ether issuance.

To address these issues, the Ethereum co-founder suggests limiting the amount of Ether a user can stake or implementing a two-tier staking system. This approach would split staked Ether into two parts: a reducible part and a non-reducible part.

These considerations are part of a broader effort to balance fees between layers 1 and 2 of the network while setting the stage for the next Pectra fork, scheduled for late 2024 or early 2025. The goal is to create a coherent Ethereum ecosystem capable of handling increased traffic without compromising its accessibility or decentralization.

In conclusion, the proposals by Vitalik Buterin to counter the centralization of staking demonstrate Ethereum’s ongoing commitment to addressing the challenges of mass adoption. The successful implementation of these solutions will be crucial to maintaining Ethereum’s position as a leading blockchain platform and ensuring its sustainability in the ever-evolving crypto landscape.