Vitalik Buterin, the co-founder of Ethereum, has put forward a proposal to encourage better decentralization of the platform by penalizing correlated failures among validators. Buterin shared his ideas on March 27 in the Ethereum Research forum, suggesting the implementation of “anti-correlation incentives” to support decentralized staking. According to his proposal, if multiple validators controlled by the same entity fail simultaneously, they would face a higher penalty compared to individual failures. Buterin believes that if one large entity makes a mistake, it is more likely to be replicated across all the identities it controls.
Buterin also noted that validators within the same cluster, such as a staking pool, are more prone to experiencing correlated failures due to shared infrastructure. His proposal suggests penalizing validators based on the deviation from the average failure rate. If many validators fail in a given slot, the penalty for each failure would be higher. Simulations indicate that this approach could reduce the advantage large Ethereum stakers have over smaller ones, as the former are more likely to cause spikes in the failure rate due to correlated failures.
The proposal offers several potential benefits, including incentivizing decentralization by requiring separate infrastructure for each validator and making solo staking economically competitive compared to staking pools. Buterin also proposed exploring different penalty schemes to minimize the advantage of big validators over smaller ones and assessing the impact on geographic and client decentralization.
However, Buterin did not mention the possibility of reducing the solo staking amount from 32 Ether (ETH), which is currently valued at approximately $111,500.
Staking pools and liquid staking services like Lido have gained popularity because they allow stakers to participate with a smaller amount of ETH. Currently, Lido has $34 billion worth of ETH staked, accounting for around 30% of the total supply. Nevertheless, Ethereum advocates and developers have expressed concerns about Lido’s dominance and the potential for “cartelization,” where pooled capital can extract outsized profits compared to non-pooled capital.
In other news, the magazine Wolf Of All Streets has raised concerns about a future where Bitcoin reaches $1 million, highlighting the risks and potential consequences of such a scenario.