Node centralisation is a “key challenge” for Ethereum as centralised web providers like Amazon Web Services dominate hosting.
Ethereum is a distributed blockchain network that supports a huge range of decentralised apps. Its native cryptocurrency, Ether, is the second largest in the world and holds a market cap of $196 billion.
In recent months however, the extent of Ethereum’s decentralisation has been brought into question, including by Vitalik Buterin – Ethereum co-founder.
Speaking at Korean Blockchain Week, Buterin stressed the importance of ensuring the decentralisation of Ethereum’s nodes, CoinTelegraph reported.
At present, a majority Ethereum’s active nodes run through centralised web providers like Amazon Web Services, which hosts a whopping 59.8%.
Google Cloud runs 6.2%, followed by Hetzner Online, which runs 5.7%.
A hosting dominance of this size leaves many uncomfortable as it subjects the network to a single point of failure, undermining the entire ethos of decentralisation. Such concerns are valid: in 2018, Amazon Web Services suffered a major outage, forcing major exchanges like Upbit offline.
In the case of Ethereum, an outage would likely have catastrophic consequences on the price of Ether.
As part of improving Ethereum’s decentralisation moving forward, Buterin emphasised the need to make it “technically easier” for people to run nodes.
“Today, it takes hundreds of gigabytes of data to run a node,” he said. “With stateless clients, you can run a node on basically zero.”
Statelessness, i.e. removing dependency on centralised servers, is a huge part of Ethereum’s future roadmap. “The ability to run Ethereum nodes on modest hardware is critical for true decentralisation,” the Ethereum Foundation outlines.
At present, Ethereum nodes are geographically concentrated in North America and Europe.
While the network plans on making its nodes more accessible, it won’t happen overnight.
“These technical problems will have to be addressed eventually — maybe a 10-year timescale, maybe a 20-year timescale,” Buterin said.
It’s not just node distribution that threatens Ethereum’s decentralisation
Yesterday, CryptoPlug reported that Lido’s “uncapped dominance” over Ethereum staking also poses a huge threat to the network’s decentralisation.
At present, the most popular way to stake Ethereum is through liquid staking, which involves delegating your Ether to a trusted staking provider (such as Lido) while still maintaining the liquidity of your assets. A key reason for this is technical ease and simplicity – since it doesn’t require any hardware, minimum investment or lock-in period.
The biggest staking provider by far is Lido Finance, which holds one third of all staked ETH (32.4%) – four times more than Coinbase, which is the second largest staker.
Of liquid staking depositors, Lido holds a staggering 86.42% market share. The second largest is Rocket Pool, which holds 8.09%.
Evan Van Ness, an independent decentralisation officer, wrote on X that “Lido may be the biggest attack on Ethereum’s decentralization (“credible neutrality”) in our entire history. It’s about to breach 33%, yet many are staying silent. Why?”
Ethereum investor Ryan Berckmans argued that Lido’s “uncapped dominance” poses a serious risk to Ethereum’s future reputation, writing: “The realistic worst-case scenario for Lido’s uncapped dominance isn’t network disruption. It’s that Ethereum develops a reputation among corporations and governments as having been ‘captured’ or ‘not actually that decentralized relative to other chains’.”
In June 2022, Buterin himself suggested something similar, tweeting that if a stake pool controls >15%, it should be “accepted and even expected” for the pool to increase its fee until the rate goes back below 15%.
If fees increase, validators will be incentivised to stake elsewhere, improving the decentralisation of the network.
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