TL;DR
- Vitalik Buterin proposes strategies to prevent staking centralization in Ethereum’s ‘Scourge’ upgrade, focusing on mitigating risks associated with PoS centralization and Maximal Extractable Value (MEV).
- Key solutions include implementing an encrypted mempool to prevent transaction censorship and introducing a two-tier staking system to manage capital provision and reduce risks.
- Application-level solutions involve promoting specialized staking hardware and encouraging solo stakers through airdrops, aiming to create a more decentralized and resilient blockchain ecosystem.
Vitalik Buterin has recently outlined a series of strategies aimed at mitigating the risks of staking centralization in the Ethereum network. These proposals are part of the upcoming ‘Scourge’ upgrade, which seeks to address several critical issues within the blockchain ecosystem.
Addressing Proof-of-Stake Centralization
In his latest blog post, Buterin highlights the potential dangers associated with proof-of-stake (PoS) centralization, particularly focusing on the issue of Maximal Extractable Value (MEV).
MEV refers to the profit that can be extracted by block producers through their ability to include, exclude, or reorder transactions within a block. Currently, two actors are responsible for choosing the contents of roughly 88% of Ethereum blocks, which increases the risk of transaction censorship and delays.
Buterin’s Proposed Solutions
To address the risks associated with centralization, Buterin proposes the use of an encrypted mempool, which would help to eliminate the possibility of transaction censorship. An encrypted mempool would make it more difficult for block proposers to censor certain transactions, thereby enhancing the network’s robustness and simplicity.
Buterin emphasizes the need for further development to create a solution that balances these attributes and is ready for implementation. Buterin also addresses the issue of capital provision for Ethereum staking.
He notes that 30% of the ETH supply is currently under staking, which is sufficient to protect the network from 51% attacks. However, if this metric reaches 100%, it could pose significant risks, including the weakening of the slashing mechanism and the needless issuance of extra ether.
To mitigate these risks, Buterin proposes placing a cap on the amount of ether a user can stake and introducing a two-tier staking system, where staked ether would be split into a slashable and an unslashable portion.
Application-Level Solutions
In addition to these network-level strategies, Buterin suggests several application-level solutions. These include developing and promoting specialized staking hardware solutions and encouraging solo stakers through airdrops.
He also proposes reducing MEV through sophisticated application design. The ‘Scourge’ upgrade represents a significant step forward in addressing the challenges of staking centralization in the Ethereum network. By implementing these strategies, Buterin aims to create a more decentralized and resilient blockchain ecosystem.
