The post Vitalik Buterin Highlights Risks & Solutions In Ethereum’s Proof-of-Stake System appeared on BitcoinEthereumNews.com.

Vitalik Buterin, co-founder of Ethereum, has outlined major risks associated with Ethereum’s Proof-of-Stake (PoS) mechanism. In a recent blog post titled “Possible Futures of the Ethereum Protocol, Part 3: ”The Scourge”. Buterin went on to describe how economic factors could cause centralization, a condition that threatened the network’s security. He outlined that more needs to be done to keep Ethereum as a decentralized platform with strong security as it continues to grow. Vitalik Buterin Highlights Risks & Solutions In Ethereum POS Buterin cautioned that the PoS of Ethereum could become concentrated over time given the principle of scale economies where the large stakers trump the smaller ones. This might result in the smaller stakers leaving the process and join the bigger staking pools. This level of centralization would increase the chance of 51% attack and transaction inhibition. The Ethereum co-founder added that large network participants could be using complex algorithms to optimize the block construction and get a higher share of the revenue. Such participants with more capital can also bear the risk of locked capital by introducing liquid staking tokens (LSTs) and pass the risks to the other smaller participants. Buterin highlighted that if these potential problems are not solved, they can erode Ethereum’s decentralization and security. Despite these concerns, analysts have pointed to a potential rally in the ETH price to record highs above the $3000 resistance by end of October.  Block Construction and Staking Capital: Areas of Concern Buterin identified two critical areas vulnerable to centralization: boarding and capital provision for staking. Larger actors could use superior algorithms to extract Maximum Extractable Value (MEV) per block to gain more revenue per block than smaller actors. This would, in turn, open up more incentives for centralization. In order to reduce these risks, Buterin suggested measures that were based…

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Filed under: News - @ October 20, 2024 11:14 am