Vitalik Buterin, one of the creators of Ethereum, has put forth several ideas to address the issue of block production and staking centralization in Ethereum’s technical roadmap’s “Scourge” phase.
In a post on October 20th, Buterin expressed concern about the concentration of staking power in larger pools due to economies of scale, while two entities were responsible for 88% of Ethereum blocks in the first two weeks of this month.
Buterin emphasized that staking centralization is one of the biggest risks to Ethereum, as it could lead to transaction censorship and other crises. He stated that the current 30% of Ether (ETH) staked is already sufficient to protect against 51% attacks, but additional risks would arise if almost all Ether were staked.
According to Buterin, staking would become less profitable and impose more obligations on Ether holders. He also mentioned that the slashing mechanism would weaken and a liquid staking token could take over the network effects from Ether.
To address these concerns, Buterin proposed capping the amount of Ether that can be staked and limiting staking penalties to 12.5% of staked Ether. He suggested a two-tier staking model with a “risk-bearing” component that is slashable and a “risk-free” component that is unslashable.
The issue of block production centralization was highlighted by Ethereum Foundation researcher Toni Wahrstätter, who pointed out that two Ethereum block builders, Beaverbuild and Titan Builder, were responsible for 88.7% of all Ethereum blocks in the first two weeks of October.
Ethereum currently follows the proposer-builder separation method for block construction, where builders create blocks for the proposer to review. However, this specialization has led to centralization problems, as noted by Buterin.
While Ethereum’s security is not at risk, Buterin pointed out that this issue could result in increased transaction censorship and longer block inclusion times, potentially up to 114 seconds instead of 6 seconds. This delay could give block builders more time to manipulate the market or extract user revenue through sandwich attacks.
Buterin proposed two solutions to address these concerns. The first is a “fork-choice-enforced inclusion lists” proposal, where the task of choosing transactions would be returned to the proposer or staker, and the builder would only determine the order of transactions. The second solution is “BRAID,” which involves splitting the block production process among multiple actors with a moderate level of sophistication.
These proposed changes aim to save Ethereum from potential issues and improve its overall functionality.