Ethereum co-founder Vitalik Buterin addressed concerns surrounding centralization risks in Ethereum’s proof-of-stake mechanism during a speech delivered in Taipei on Thursday.
Highlighting a key challenge, Buterin emphasized the potential for centralization resulting from the behavior of “lazy stakers” within the Ethereum ecosystem. These individuals possess a minimum of 32 ETH required to operate a validator but opt for staking pools and liquid staking tools instead of solo staking, posing centralization risks.
Buterin underscored the importance of promoting solo staking as a means to mitigate centralization risks, noting that despite the potential ease of solo staking, many individuals still opt for alternative methods. He emphasized the reliance on social pressure and virtue to address network security concerns, cautioning against over-reliance on these factors.
The Ethereum liquid staking protocol Lido, which currently boasts a total value locked (TVL) of $34.3 billion, has emerged as the largest validator on the Ethereum proof-of-stake blockchain, controlling 30% of staked ether. However, concerns have been raised regarding the concentration of staking power in entities such as Lido, Coinbase, and Binance.
In response to these concerns, Buterin introduced the concept of “rainbow staking” as a strategy to decentralize staking activities. This framework aims to engage protocol service providers, both “solo” and “professional,” to participate in a differentiated menu of protocol services, categorizing staking into “heavy” and “light” categories to ensure a more balanced distribution of staking activities.
Looking ahead, Buterin posed a crucial question about the participation of individuals holding significant amounts of ETH and outlined the need for a realistic approach to encourage their involvement in staking activities. He emphasized the importance of providing viable alternatives to centralized solutions to foster a secure and robust staking economic design.