Vitalik Buterin Proposes Solutions to Address Ethereum’s Staking and Block Production Centralization

Vitalik Buterin, co-creator of Ethereum, has suggested new measures aimed at tackling the growing issue of staking and block production centralization within the Ethereum network. In a blog post dated October 20, Buterin highlighted concerns over the centralization risks posed by large staking pools and the increasing dominance of a few block builders.

Buterin noted that economies of scale within staking have driven smaller pools to consolidate into larger ones, creating a significant centralization problem. Over the first two weeks of October, just two entities—Beaverbuild and Titan Builder—produced 88.7% of all Ethereum blocks. This concentration, Buterin warned, could lead to transaction censorship and other critical issues.

Staking Centralization Threats

Currently, about 30% of Ether (ETH) is staked, a figure Buterin believes is sufficient to safeguard Ethereum from 51% attacks. However, he cautioned that as more Ether becomes staked, the network could face new risks. He outlined concerns that staking could become less profitable and impose additional burdens on Ether holders, with the slashing mechanism weakening as a result.

To counter these risks, Buterin recommended capping the amount of Ether any individual or entity can stake and proposed limiting staking penalties to 12.5% of the staked amount. These measures, he believes, could help prevent centralization and ensure that the network remains decentralized and secure.

Block Production Centralization

Along with staking, block production has also become a focal point of Buterin’s concerns. Ethereum currently follows the proposer-builder separation model, where block builders create blocks for proposers to review, often selecting the most profitable ones. However, this model has led to a high degree of centralization, with a small number of block builders dominating the space.

Buterin warned that this centralization could result in slower transaction inclusion times, increasing from the current 6 seconds to as long as 114 seconds. This delay could create opportunities for market manipulation, particularly in decentralized finance (DeFi) liquidations and sandwich attacks, where block builders exploit transaction order for profit.

Proposed Solutions

To address these challenges, Buterin pitched a proposal for “fork-choice-enforced inclusion lists.” This would shift the responsibility for selecting transactions back to the proposer or staker, while allowing the builder to focus on ordering transactions and inserting their own.

While Ethereum’s security is not immediately at risk, Buterin stressed that these centralization trends must be addressed to prevent longer-term problems such as censorship and market manipulation. His proposed solutions are part of the broader “Scourge” phase of Ethereum’s roadmap, aimed at maintaining the network’s decentralization and ensuring its long-term viability.

As Ethereum continues to evolve, Buterin’s proposals could play a critical role in safeguarding the network against the risks of centralization, preserving its decentralized ethos, and maintaining its appeal to a wide array of participants.