Many of the benefits promised by the Ethereum merger have been realized, including over 99% reduction in energy use and carbon emissions. But analysts who raised the alarm about increased centralization before the transition remain concerned that relatively few entities dominate the proof-of-stake mechanism that now underpins the blockchain.
“[The] Martin Kopelman, co-founder of the DeFi platform Gnosis, tweeted the top 7 entities that control more than 2/3 of the stake.
He published a chart showing that the Ethereum staking service Lido handles more than 27 percent of stake-based Ethereum validation, followed by crypto exchange Coinbase at over 14 percent.
A recent Dune Analytics report confirmed that the two largest companies in Ethereum are currently Lido with 4.16 million ETH (30.1%) and Coinbase with 2 million ETH (14.5%). The remaining shares, categorized as “other”, hold 3.65 million ETH (26.5%).
Decentralization is a major goal of Crypto and Web3. The fact that Bitcoin is “decentralized enough” is the main reason why it remains outside the intersection of US regulators.
Security experts note that if participation in Ethereum validation becomes too centralized, the probability of a “51 percent attack” becomes more than just a theory. Moreover, dominant parties can be pressured to censor transactions on the blockchain – although Coinbase CEO Brian Armstrong said such a scenario would push his company out of the betting business.
Unlike Proof of Work, which requires a great deal of hardware and energy to profitably mine and maintain a blockchain network, Proof of Stake is more dependent on users buying, holding, and accumulating large amounts of the network’s cryptocurrency. Some critics described the merger as Move towards central.
The Nakamoto coefficient of Ethereum 2 (the measure of decentralization) after the merger is 2
Most ETH is pooled with only two entities, Lido and Coinbase
Now that Ethereum has relied on proof of stake, validators with at least 32 ETH can participate or pledge to the network, rather than relying on miners. Smaller groups can create staking pools to consolidate their ETH to become validators or join an exchange offering staking.
“You shouldn’t be involved in the exchange,” Mika Zolto, the core developer of Ethereum, warned in a recent interview. untieR. “It hurts the network rather than helps, and the ROI at the moment is probably not worth it.”
Zoltu recommends that users share their ETH to run their own Ethereum node, which Ethereum owners can do on a PC. “It can be done by anyone who has a good enough computer, electricity and internet,” he said.
Meanwhile, Kopelman noted that the top cryptocurrency Bitcoin also has a centralization problem.
“No, dear Bitcoin fans, I’m not better at Bitcoin,” said chirp. “In fact, you only need 4 entities to get to >72%.”
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