Vitalik Buterin Proposes Incentive Scheme to Boost Ethereum's Decentralization
Summary:
Ethereum co-founder, Vitalik Buterin, has suggested a method to improve Ethereum's decentralization by increasing penalties for multiple related failures among validators, especially when managed by the same operator. Aimed at encouraging validators to operate independently, the proposal may reduce the edge large Ethereum investors have over smaller ones. Buterin's suggestion includes different penalty models to lessen the advantage of major validators and analyzing the effect on decentralization. He did not discuss reducing the staking amount from the current 32 Ethereum.
On March 27, Ethereum co-founder Vitalik Buterin shared his idea to better encourage decentralization of Ethereum by issuing higher penalties for multiple failures among validators under the same operator. Buterin detailed his recommendation on the Ethereum Research forum, stating that a more considerable penalty should be in place for collective failures over individual ones.
Buterin noted that validators from the same group, such as a pooling system, tend to encounter correlated failure more often, primarily because they utilize shared infrastructures. The new suggestion involves issuing penalties to validators based on how much their failure rate deviates from the average. If a higher number of validators fail during a slot, the punishment for each failure would increase.
Preliminary simulation studies suggest that this technique could diminish the benefits enjoyed by significant Ethereum investors over smaller ones, as larger entities tend to cause an uptick in failure rates owing to correlated failures.
Additional benefits might comprise encouraging decentralization by allocating distinct infrastructure to every validator, and making individual Ethereum staking more financially competitive compared to staking pools. Buterin also brought up exploring other possibilities like various penalty models that could further reduce the advantage held by big validators over smaller ones, and studying its effect on geographic and client decentralization.
However, he did not comment on the potential decrease of the sole staking amount from the current 32 Ethereum (ETH), which is roughly equivalent to $111,500. Because of their lower ETH requirement, staking pools and fluid staking services like Lido remain preferable among investors.
Lido currently holds staked ETH valued at $34 billion, accounting for about 30% of the total supply. Previous warnings have been issued by Ethereum backers and programmers concerning Lido's dominance and the risk of "cartelization", which refers to the disproportionate profits that can be reaped compared to non-pooled resources.
Published At
3/28/2024 9:09:07 AM
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