Vitalik Buterin, one of the co-creators of Ethereum, has put forward various solutions to address the issues of block production and staking centralization in Ethereum’s technical roadmap phase known as “Scourge.”
Buterin expressed his concern in a post on October 20, stating that economies of scale in staking have caused smaller pools to join larger ones. Furthermore, he noted that two entities were responsible for building 88% of Ethereum blocks in the first two weeks of this month.
The centralization of staking poses a significant risk to Ethereum, according to Buterin. He believes it could lead to transaction censorship and other potential crises. Buterin mentioned that currently, 30% of Ether (ETH) is staked, which is already sufficient to protect Ethereum from 51% attacks. However, if almost all Ether were to be staked, additional risks would arise.
Buterin argued that staking would become less profitable and impose more obligations on Ether holders. He also suggested that the slashing mechanism would weaken, and a liquid staking token could replace Ether as the primary network asset.
To address these concerns, Buterin proposed capping the amount of Ether an individual can stake and limiting staking penalties to 12.5% of the staked Ether. He suggested implementing a two-tier staking model, which includes a “risk-bearing” (slashable) and a “risk-free” (unslashable) component.
Buterin’s worries about block production centralization arise from recent findings by Ethereum Foundation researcher Toni Wahrstätter. Wahrstätter discovered that Beaverbuild and Titan Builder constructed 88.7% of all Ethereum blocks in the first two weeks of October.
Ethereum currently follows the proposer-builder separation method for block construction. Builders create blocks for the proposer to review, with the aim of selecting the most profitable one. However, Buterin believes that assigning specialized tasks to specific actors has led to centralization problems.
While Ethereum’s security is not at risk, Buterin warned that the issue could result in increased transaction censorship and force users to wait up to 114 seconds for block inclusion instead of the usual 6 seconds. This delay could provide block builders with more time to carry out sandwich attacks or manipulate the decentralized finance market.
To address these concerns, Buterin proposed a “fork-choice-enforced inclusion lists” proposal, which would give the task of choosing transactions back to the proposer or staker, while the builder would only determine the order of transactions. Another solution he suggested is “BRAID,” which involves splitting the block production process among multiple actors, each requiring a moderate level of sophistication to maximize revenue.
Overall, these proposed changes aim to save Ethereum from potential issues and ensure its continued success in the future.