Fears about the decentralization of Ethereum? After the success of the Merge, one of the co-founders of Ethereum, Anthony Di Iorio, exposes his fears regarding the centralization of the network. So what is it really and what are the dangers of this centralization?
The centralization of the network raises questions.
Ethereum has just achieved one of the most important milestones in its history. With The Merge, the network has just switched from proof of work to proof of stake, all without a hitch. This transition has positive effects on the energy footprint of the network and on its future scalability.
However, many voices are raised about the risk of too much centralization for Ethereum. Among them, we find one of the co-founders of Ethereum, Anthony Di Iorio. The Canadian entrepreneur, like many observers, wonders about the domination of a few players who hold a significant part of the Ethereum network in their hands.
It highlights in particular the excessive percentage of validating nodes in the hands of players like Coinbase. He says about this:
"I am concerned about the risks of centralization linked to proof of stake. I think right now it has been shown that there are only two addresses that account for almost 50% of all validations. I get worried when I look at players like exchanges that have a lot of strength and validation in their hands. It's not a perfect system, and who knows, there might be things that happen that haven't been thought of that could lead to greater risks."
Too much concentration?
As a reminder, nearly 64% of Ether stakes are deposited with only 5 players. Indeed, Lido Finance, Coinbase, and Kraken alone represent 54.5% of ETH staked. This concentration raises the question of the risk of censorship. Indeed, these players, most of them on American soil, could be subject to the wishes of the regulator.
The distribution of staked ETH (source: Nansen)
This is what the SEC is trying to do. Recently the American regulatory policeman claimed that Ethereum transactions take place in the United States. For the regulator, given the concentration of validating nodes in the United States, it makes sense to say that the Ethereum network is located in the country. This shortcut could actually bring Ethereum under its jurisdiction. However, we are still far from such a scenario.
A return to mandatory decentralization?
Faced with this unattractive state of affairs, Di iorio recalls the original desire for decentralization at the heart of Ethereum. For him, the primary mission of Ethereum was to involve as many people as possible in the governance of the asset. He, therefore, warns against this too great centralization which should not last in time for him. He declares:
"What you want with decentralized networks are robust nodes; you want a lot. Someone who leverages a technology that people do anywhere in the world participates in, and helps strengthen the ecosystem should be rewarded for it. But it doesn't help when you only have a few, and it becomes more and more centralized."
These fears seem legitimate and contrary to the original will of the project. Decentralization is one of the frequent sticking points of many blockchains. XRP, Solana, and now Ethereum come under regular criticism over this.
Decentralization is one of the guarantees against the risk of censorship of a blockchain. In addition, better decentralization also aims to strengthen the security of the network itself. Indeed, when the network is in the hands of a few actors, it becomes more easily attacked. The future will tell us if Ethereum manages to improve this situation and finds a decentralization worthy of its original wishes.
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