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Ethereum co-founder Vitalik Buterin has expressed concerns about the centralization risks posed by Proof of Stake (PoS), revealing that two companies produced 88% of Ethereum blocks in the first half of October. He suggests that the current 30% of Ether locked in staking is sufficient to protect Ethereum but anticipates problems if all Ether were staked. To combat this, Buterin proposes limiting the Ether amount an individual can stake and capping staking penalties to 12.5% of staked Ether. He also suggests more evenly distributing block creation responsibilities to reduce centralization and related risks.

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Vitalik Buterin, one of the founders of Ethereum, has suggested a few ways to help Ethereum avoid excessive centralization during the so-called “Scourge” phase in its developmental plan. On October 20, he expressed concern that small pools are being outranked by larger ones in the staking arena, leading to increasingly centralized authority. Specifically, he noted that two providers have produced a whopping 88% of Ethereum blocks in the first half of October.

Buterin pinpointed the centralization of staking as a considerable risk, fearing it could mean higher chances of transaction censorship and other unwanted situations. In his words, “Proof-of-stake centralizing due to economic pressures poses one of the biggest risks to Ethereum.”

He argued that the existing 30% of Ether (ETH) being staked is more than sufficient to secure Ethereum against major attacks. Still, problems could emerge if practically all Ether were to be staked. This would make staking less profitable, put more responsibilities on Ether owners, possibly weaken the punishment system, and a liquid staking token might take over Ether’s “money” network effects.

To address these concerns, Buterin proposed limiting the quantity of Ether a user can stake, and capping staking penalties at 12.5% of staked Ether. His answer is a two-tier staking model, which separates those at risk of penalties (slashable) from those exempt from such risks (unslashable).

Buterin’s concerns over the consolidation of block production were sparked by recent observations from Ethereum Foundation researcher Toni Wahrstätter, who noticed that Beaverbuild and Titan Builder were responsible for nearly 89% of all Ethereum blocks created in the first two weeks of October.

Further, Buterin suggested that Ethereum’s method of separating builders (who create blocks) from proposers (who review and select blocks) has resulted in more centralization. Dedicating specific tasks to certain roles is, he suggests, part of the problem. If not addressed, this issue could lead to more cases of transaction censorship and increased wait times for block inclusion, rising from 6 seconds to 114 seconds.

One of Buterin’s suggestions to counteract this is the “fork-choice-enforced inclusion lists” proposal. In this scenario, the task of selecting transactions would go back to the proposer or staker, while the builder only chooses the transaction’s order. Another suggestion from Buterin is known as “BRAID,” a system that divides the block creation process among numerous actors, requiring only a medium level of sophistication to maximise their returns.

Source: Cointelegraph