Vitalik Buterin, co-founder of ethereum eth.limo/general/2024/10/20/futures3.html”>believe that proof-of-stake (POS) centralization represents a significant threat to ethereum. POS centralization is where the big players dominate and the small ones join the big groups.
Centralization increases the risk of problems such as 51% attacks and transaction censorship. Additionally, there is the risk of value extraction, where a small group benefits at the expense of ethereum users.
According to Buterin, risk exists in the construction of blocks and in the provision of capital.
the problem
ethereum follows the proposer-builder separation (PBS) protocol for building blocks. This means that the work is divided between validators, who propose blocks and auction the responsibility for choosing the content of the blocks, and builders, who organize the transactions in a block and place bids.
Buterin noted:
“This separation of powers helps keep validators decentralized, but comes at a significant cost: the actors performing the “specialized” tasks can easily become very centralized.”
Data from October 2024 indicates that just two builders are responsible for 88% of ethereum blocks. This means that if these two builders decide to censor a transaction, it can cause a delay: the transaction processing can take an average of 114 seconds instead of 6 seconds. While the delay may not affect certain transactions, builders can manipulate the market by delaying urgent transactions, such as those for decentralized finance (DeFi) settlements.
Therefore, the concentration of power can pose serious threats to the integrity of ethereum.
Solutions
According to Buterin, one of the best solutions to avoid centralization is to further divide responsibilities for block production. Buterin proposes that the task of choosing the transactions should return to the proposer, or the bettor, and the builder will only be able to choose the order of the transactions and insert some of his own. This can be achieved through ethereum-magicians.org/t/eip-7547-inclusion-lists/17474″>inclusion lists.
This is how it would work. A randomly selected participant creates an inclusion list, which includes valid transactions. A block creator, when creating a block, must include all transactions in the inclusion list, but has the power to rearrange them and add their own transactions.
Another possible solution is multi-simultaneous proposer (MCP) schemes such as BRAID. According to Buterin, “BRAID seeks to avoid dividing the role of the block proponent into a part with low economies of scale and a part with high economies of scale, and instead attempts to distribute the block production process among many actors, in such a way that each proponent only needs to have a medium level of sophistication to maximize his income.”
Buterin noted that encrypted mempools are a crucial technology needed to implement the design changes mentioned above. By using encrypted mempools, users can transmit their transactions in an encrypted format along with proof of their validity. Transactions are also included in the blocks in encrypted form; the constructor does not know the content. The transactions are only revealed later.
Buterin wrote that the main challenge of implementing encrypted mempools is ensuring a design in which transactions are definitively revealed later. This can be achieved through two techniques: (i) decryption thresholdand (ii) delay encryption.
