The decentralization of Ethereum is being questioned post Merge by the community, here’s why!
Despite the Ethereum Merge’s massive success on September 15th, switching from a Proof-of-Work consensus to a Proof-of-Stake consensus with no issues, the blockchain has since found itself under some scrutiny after the community found new data of its current validators.
Just hours after the transition to Proof-of-Stake, it was found that over 40% of the networks blocks were added by just two entities.
The two major firms that were found to be responsible for a big part of Ethereum’s validation were the crypto exchange Coinbase, and Ethereum staking service Lido.
To put it into better perspective, a recent report published by Dune Analytics showed that Lido has recently staked around 4.16 million ETH (30.1%) and Coinbase staked 2 million ETH (14.5%). The rest of the stakers have reportedly staked 3.65 million ETH (26.5%).
Aside from that, it was also found that the Top 7 Ethereum validators overall have so far been responsible for up to 67% of the blocks in this new Proof-of-Stake Ethereum.
The Top 7 entities have created 67% of blocks in ETH 2.0 so far. pic.twitter.com/d08lky46NO
— Magoo PhD (@HodlMagoo) September 15, 2022
Growing Fears Of Centralization
With two major firms being responsible for up to 40% of Ethereum’s staking and only 7 entities responsible for more than half of Ethereum’s staking, fears have been growing that Ethereum is becoming more centralized than ever.
This could lead to all sorts of issues for the blockchain and its community in the future, like risk of being forced to censor transactions by the government.
Because of this, many have criticized Ethereum as well as the Proof-of-Stake consensus in general, claiming that it is only a backwards move towards Web3’s goal of being decentralized.
However, some have pointed out that it’s not just Ethereum that has issues with centralization, Bitcoin itself, has been pointed out by a number of people in the community to have an issue with centralization despite having a Proof-of-Work consensus.
And no, dear Bitcoin fans, it is not better in Bitcoin. In fact you need only 4 entities to come to >72% pic.twitter.com/EdGDN3Mr6S
— Martin Köppelmann 🇺🇦 (@koeppelmann) September 15, 2022