Ethereum co-founder Vitalik Buterin has proposed several solutions to help Ethereum minimize block production and the centralization of staking during the “Scourge” phase of Ethereum’s technical roadmap.
Staking can become centralized
In his post of October 20, Buterin expressed concern that, due to the scale effect in staking, smaller staking pools are being absorbed by larger pools. In the first two weeks of this month, 88% of Ethereum blocks were created by just two organizations.
Buterin emphasized that the centralization of staking poses “one of the biggest risks” to Ethereum and could lead to a higher risk of transaction censorship and “other crises.” He stated, “One of the biggest risks for Ethereum L1 is the centralization of Proof-of-Stake due to economic pressure.”
Buterin noted that the 30% of Ethereum currently staked is already more than enough to protect Ethereum from 51% attacks, but if nearly all Ethereum is staked, additional risks will arise.
He recommended limiting the amount of Ethereum a user can lock in the network and capping staking penalties at 12.5% of the staked Ethereum.
This can be achieved through a two-tiered “risky” (with the possibility of reduction) and “risk-free” (without the possibility of removal) staking model.
His concerns about the centralization of block production arose after Ethereum Foundation researcher Toni Wahrstätter recently noted that two Ethereum block producers — Beaverbuild and Titan Builder —created 88.7% of all Ethereum blocks in the first two weeks of October.
Solutions to the problems, as proposed by Buterin
Ethereum employs a method of separation between block creators. Some generate blocks, while others verify and often select the most profitable ones. However, the distribution of “specialized” tasks among specific participants has led to centralization issues, Buterin said.
While Ethereum’s security is not at risk, Buterin stated that this issue could lead to increased transaction censorship and force Ethereum users to wait for block inclusion for up to 114 seconds instead of 6 seconds.
This delay could give block developers more time to extract profits from users through sandwich attacks (which occur when an attacker “sandwiches” a victim’s transaction between two of their own transactions to manipulate the price and profit from the user) or lead to “significant market manipulation” through the liquidation of decentralized finance.
Buterin introduced a proposal for “Fork-Choice Enforced Inclusion Lists (FOCIL),” where the task of selecting transactions would return to the initiator or staker, while the creator would only choose the order of transactions (in addition to inserting their own transactions).
An alternative solution is BRAID — a proposal in which the block production process is distributed among several participants, each of whom requires only a “small share of participation to maximize their income.”p>
