While Ethereum (ETH) inches closer to the mainnet release of its Proof-of-Stake version, DeFi enthusiasts are asking whether ETH2 staking can be protected from whales’ domination
Many Ethereum (ETH) enthusiasts are concerned about the possible centralization of the ETH2 staking process. As such, they discuss measures to prevent the “oligarchs” from dominating.
High fees for fat cats
Pseudonymous Ethereum (ETH) enthusiast Superphiz.eth who is an activist of Ethereum Beacon Chain community, has taken to Twitter to share his concerns about the centralization in upcoming ETH2 network.
I wonder, who will be the first staking provider to publicly commit to limiting themselves to operating no more than 22% validators on-chain? Who do you want to see stepping in and prioritizing the health of the beacon chain over profits?
Namely, he is guessing which pool will be the first to limit its own staking ‘power’ (share of controlled validators participating in signing Ethereum (ETH) transactions) by e.g. 22 per cent of total validators number.
Potentially, this decision would reduce the profits of this “pioneer” but it would greatly contribute to the health of the network as a whole by reducing the possibility of attack by 51%.
Ethereum’s founder Vitalik Buterin proposed ‘economical’ motivation for this limit. It looks reasonable for him to increase fees for the participants of staking pools controlling over 15 % of network.
Once the “share” of a particular pool drops below 15%, fees can be reduced back to “normal” levels.
Here’s how Cardano (ADA) addressed such issues
It should be noticed that Ethereum (ETH) – even in its Proof-of-Work (PoW) version is criticised for ‘centralization’: major mining pools are controlling large lions share of its hashrate.
As previously reported by U.Today, the Cardano (ADA) community faced similar issues after the launch of ADA staking. Step by step, Input Output Global (IOG) introduced a number of limitations to make staking through large pools less profitable. By adjusting so called k-parameter in 2021, it allowed small and medium pools to surpass the top 10 staking whales by share of ADA staked.
