Vitalik Buterin’s proposal seeks to encourage separate infrastructure for validators, promoting decentralization.
A new incentive framework for Ethereum decentralization has been put forth by Vitalik Buterin, co-founder of the platform. This framework aims to discourage correlated failures among validators.
As per the research proposal put forth by Buterin, the decentralized staking sector is unbalanced due to the unfair advantage held by large-scale staking organizations and groups over more minor participants.
However, according to Vitalik Buterin, validators who are under the control of the same entity ought to be penalized more severely for failing collectively than for failing individually.
Errors committed by a solitary prominent actor are more likely to be replicated across all the “identities” they control, according to this strategy’s underlying theory.
Staking pools and liquid staking services, such as Lido, continue to be well-liked by users because their platforms permit a greater number of stakers to participate at a reduced entry cost (in ETH).
At present, Lido holds an approximate 30% stake in ETH, or $34 billion, which corresponds to the total supply.
Decentralization of Ethereum proponents and developers have previously issued warnings regarding Lido’s hegemony and the possibility of “cartelization,” a phenomenon characterized by the extraction of disproportionately large profits relative to non-pooled capital.
As a result of shared infrastructure, validators within the same cluster, such as a staking pool, are more prone to correlated failures, according to Buterin’s analysis of recent attestation data.
To tackle this concern, he suggested that validators be penalized proportionately, deviating from the mean failure rate. If many validators fail in a given period, the penalty per failure will increase.
The advantage of larger Ethereum stakers over smaller ones could be diminished by such a system, according to simulations of this scenario, because large entities are more likely to cause increases in the failure rate due to correlated failures.
Evaluating Vitalik Buterin’s Proposal
Potential benefits of the proposal include encouraging separate infrastructure for each validator, which would promote Ethereum decentralization and make individual staking more economically competitive compared to staking pools.
However, she observes that additional research could be conducted on alternative alternatives. This includes modifications to the penalty mechanisms to reduce the advantage that the average “big” validator has over smaller validators.
As per Vitalik Buterin, an additional aspect worthy of investigation is the framework’s influence on client and geographic decentralization.
Nevertheless, the potential for a reduction in the solitary staking amount from the existing 32 Ether (ETH) or an estimated $111,000 (approximately $3,500), given the current price of Ether, was not addressed.
