After the success of Merger, one of the co-founders of Ethereum, Anthony Di Iorio, revealed his fear of 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 reached one of the most important milestones in its history. With The Merge, the network has just changed from proof of work to proof of the issue, all with ease. This move has positive effects on energy footprint of the network and on a scalability future.
However, many voices are raised about the risk of excessive centralization for Ethereum. Among them, we see that one of the co-founders from Ethereum, Anthony Diorio. The Canadian entrepreneur, like many observers, wonders about the dominance of a few actors which have a significant share of the Ethereum network in his hands.
It particularly highlights the excessive percentage of validated nodes in the hands of players like Coinbase. He says about this:
I am concerned about the centralization risks of proof of stake. I think it has now been directly demonstrated 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, unexpected things may happen that could lead to greater risks.
Crypto-assets are a risky investment.
Too much concentration?
As a reminder, almost 64% of Ether stakes are deposited with 5 players only. In fact, Lido Finance, Coinbase and Kraken alone account for 54.5% of the ETH in question. As a result of the concentration to ask the question of the risk of censorship. In fact, these actors for the most part on the american soilto be subject to the wishes of the ruler.
Distribution of the ETH in question (source: Nansen)
This is what CSS is trying to do. Recently the police of the American regulation declared that the Ethereum transactions took place in the United States. Regarding the regulatory authority, in light of cconcentration of validation nodes in the United States, it is logical to say that the Ethereum network is located in the country. This shortcut could really do it Ethereum switch under its jurisdiction. However, we are still far from such a situation.
Return to mandatory decentralization?
Faced with this unattractive situation, Di iorio recalls the original desire for decentralization at the heart of Ethereum . For him, Ethereum’s primary mission was to maxims in asset governance. He therefore warns against this excessive centralization which he believes should not last in time. It declares:
What you need with decentralized networks are strong nodes; you want a lot. A person who uses technology made by people anywhere in the world, participates and helps strengthen the ecosystem and should be rewarded for it. But it doesn’t help when you only have a few, and it’s more centralized.
These concerns seem legitimate and contrary to the original intent of the project. Decentralization is one of the frequent sticking points many blockchains. XRP, Solana and now Ethereum receive regular criticism on this subject.
Decentralization is one of the defenses against risk of blockchain censorship. In addition, better decentralization aims to strengthen the security of the network itself. In fact, when the network is in the hands of several actors, it is easier to attack. The future will tell if Ethereum succeeds improve this situation and get a decentralization worthy of its original intentions.
To find out more about the consequences of the Merger and the risks according to the bank JP Morgan, find our article here.
