Last week, excitement built up to a critical moment when – in just an instant – Ethereum’s world flickered from one reality to another. Since then, the network has already shown signs of change. skesslr writes for this week’s Valid Points newsletter.
Ethereum developers frame proof-of-stake as a more decentralized and secure alternative to mining – making it possible for anyone with 32 ETH to play a role in supporting the network, no fancy equipment required.
But a few entities like Lido, Coinbase, Kraken and Binance have amassed more than 50% of the resources required to secure the network. They’ve done so by making it possible for people with less than 32 ETH to pool their resources and become validators – almost like a crypto equivalent of fractional shares.
Centralization is not just a proof-of-stake problem. Köppelman followed up his original tweet by noting that Bitcoin, which continues to use proof-of-work, also has issues with centralization: “No, dear Bitcoin fans, it is not better in Bitcoin. In fact you need only 4 entities to come to >72%” This means Etheruem’s pool operators can, at least for now, act without fear that their users will get angry and cut ties.