Rethinking Ethereum staking: A quest towards decentralization!

The Ethereum protocol, a cornerstone of the world of decentralized finance, is seeing a major evolution in its staking mechanisms, asking crucial questions about decentralization, efficiency and rewards in the context of its network.

The Dilemmas of Two-Tier Staking

A few days ago, an announcement emerged regarding the possible integration of new features on Ethereum. Vitalik Buterin, the protocol’s co-founder, explicitly shared his concerns about the future of the platform on his personal blog, highlighting the decentralization risks inherent in the current staking model.

In a article blog recently shared on X by Buterin, a strategic plan is put forward in order to make significant changes to the protocol and the staking pool. The overall goal is to improve decentralization and minimize consensus costs.

Ethereum currently operates under a two-tier staking model, exemplified by notorious pools such as Lido and RocketPool, inherently dividing the ecosystem into two categories: node operators and delegates.

Although this structure offers liquidity via tokens like stETH and rETH, it faces two major issues: a tendency towards centralization and a significant load on consensus, due to the need to verify 800,000 signatures per epoch on Ethereum L1.

The importance of delegates within the current Ethereum staking model is highlighted. Their participation, although rewarded, raises the question of their effective contribution to the security and decentralization of the network.

Rethinking the Staking Structure for Ethereum

Faced with these challenges, an overhaul is necessary. The goal ? Ensuring that each participant, including delegates, strengthens the security and decentralization of Ethereum.

Suggested areas for improvement include:

  1. Amplifying delegate selection: enhance the power of delegators in choosing node operators through improved voting tools and increased competition between pools.
  2. Lighter consensus participation: propose a lighter consensus role for delegators, facilitating their contribution to the security and decentralization of the network without constraining them to the drastic requirements imposed on node operators.
  3. Consensus fee optimization: By readjusting the staking structure to include a complex layer with fewer participants and a simpler one that participates sporadically, this could alleviate the load on the consensus layer.
  4. In-Protocol Registration: Implement these adjustments either at the staking pool level or directly in the Ethereum protocol, while aiming to minimize economic changes in the protocol.

By following these recommendations, Ethereum would allow more players, even with limited resources, to actively participate in the security and decentralization of the network. While reducing the computational load, implementing participation and optimizing consensus would strengthen the power of small investors and delegators.

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