As a seasoned crypto investor with over a decade of experience under my belt, I’ve witnessed the evolution of Ethereum from a promising concept to a blockchain titan. Vitalik Buterin’s latest blog post on Ethereum’s “Scourge” upgrade has piqued my interest once again.
In a series of recent blog articles, Vitalik Buterin, co-founder of Ethereum, has unveiled a fresh blueprint for Ethereum as part of the “Scourge” update. He also emphasized potential strategies that the Ethereum community might employ to mitigate the risks associated with centralization in staking.
In his earlier blog entries, Buterin delved into the “Merge” and “Surge” updates, focusing on enhancements related to Ethereum staking. Furthermore, he outlined a challenging objective: aiming for a processing capacity of up to 100,000 transactions per second, encompassing both Layer 1 and Layer 2 networks within the blockchain system.
In his most recent blog entry, Buterin highlights the potential for proof-of-stake centralization to pose a significant threat to the Ethereum L1. As part of the network’s forthcoming “Scourge” update, he proposes several strategies to minimize these risks. The Ethereum co-founder emphasizes that the primary areas where these dangers may arise are in the provision of staking capital and the construction of blocks.
Via Buterin’s observations, he highlighted the issue of Maximal Extractable Value (MEV), stating that at present, approximately 88% of Ethereum blocks are being determined by two parties. This situation amplifies the potential for censorship, which could temporarily halt a transaction and create complications with token exchanges or urgent liquidations.
Additionally, Buterin suggested that a crucial element of the solution might involve an encrypted transaction queue (mempool), making it harder for block creators to suppress specific transactions. In his blog post, he emphasized that additional work is required to design a system that is both robust, uncomplicated, and potentially ready for implementation.
Buterin proposes a prudent strategy could be to initially set up a system where stakeholders have restricted authority and most of the authority is auctioned off, allowing us to observe its effects on the MEV market within our live network. As we gather more information and insights, we can gradually expand the authority of the stakeholders over time.
Capital Provision for Ethereum Staking
According to Ethereum’s co-creator, approximately a third of all Ether (ETH) is currently being held for staking, which he considers “plentiful” and sufficient to safeguard Ethereum against potential 51% attacks. However, Buterin cautions that if the proportion of staked ETH rises to 100%, it could introduce additional risks such as a dilution of the slashing penalty’s impact and potentially unnecessary issuance of approximately one million new Ether each year.
According to Buterin, a single liquid staking token could potentially supersede the “money network” influence of the Ethereum blockchain itself. To tackle this issue, he suggests two primary approaches: limiting the amount of Ether a user can stake and implementing a dual-tier staking system. In this new system, staked Ether would be divided into a vulnerable and an invulnerable component. He put it this way:
“We have two options left to consider. One is to take no action, understanding that most ETH could end up inside LSTs and accept the associated risks. The other option is to reach an agreement on the specifics of one of the proposed plans.
Beyond addressing the stated problems, Vitalik Buterin has also offered some application-level resolutions. For instance, he advocates for the creation and endorsement of tailored staking hardware solutions. Furthermore, he proposes the concept of solo stakers who could potentially receive airdrops, while simultaneously working towards minimizing Market Execution Void (MEV) through advanced application design.
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2024-10-21 11:41