Buterin also touched on the roadmap for ethereum‘s technical upgrades, referring to an impending transition called ‘Danksharding’ that expands data availability and allows for more transactions per block.
Speaking recently at the Turkish Blockchain Summit, ethereum co-creator Vitalik Buterin discussed some of the platform’s plans to improve decentralization around staking while also providing updates on upcoming changes to the network intended to increase usability. Recognizing the growing importance of cryptocurrency adoption in Turkey and around the world, Buterin explained intentions to rework ethereum‘s existing staking model to divert the influence of large mining pools and better empower individual node operators on the network.
Currently, most participants participate through centralized third-party platforms such as Lido and Coinbase. By designing improvements that make it easier and more affordable for people to run validator nodes, the network can reduce concentration risk.
The Risk of Centralization of ethereum Staking Pools
The centralization of ethereum staking processes has been a major concern since the Merge update. There has been increased concentration in the hands of major exchanges such as Lido, Coinbase, Figment and Binance, accompanied by a decline in staking performance. Consequently, the ethereum network is exposed to significant risks.
A critical issue that arises from this overcentralization is the potential risk posed by a single point of failure. An issue with any of the major betting platforms mentioned could cause a major outage to the ethereum network. With the intensification of staking activities, the risk to network stability and security is also increasing.
To address some of the risks associated with centralization, Lido, ethereum‘s largest shareholder with more than $14 billion in total value locked, has been increasing the number of node operators. This strategy aims to control the amount of staked Ether managed by a single trader. All of this makes the issue of centralization a major concern for ethereum users and developers.
Upcoming technical updates for the ethereum network
Buterin also touched on the roadmap for ethereum‘s technical upgrades, referring to an impending transition called ‘Danksharding’ that expands data availability and allows for more transactions per block. This sets the stage for more adjustments to parameters and attributes in the future. To avoid relying solely on disruptive ‘hard forks’ when making modifications, concepts related to governance voting are also being explored.
Some criticism was leveled at Buterin’s mention of using Unspent Transaction Output (UTXO), a model employed by competing blockchain network Cardano. Cardano founder Charles Hoskinson noted that his team has been using UTXO-based frameworks for almost a decade without receiving recognition until recently.
Looking ahead, Buterin projected a timeline for the full Denkun upgrade, starting in early 2024. This brings together most of the individual technical improvements on the roadmap. Overall, Buterin’s talk provided useful transparency into ethereum‘s priorities around decentralizing staking participation, overcoming technical challenges, and the process to improve the network’s capabilities in the coming years through from events like Danksharding and Denkun.
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