The shift to proof of stake has atlas explain the impact on the blockchain’s decentralization
The Ethereum merge is here and a lot of the benefits have already started to come to pass. There is now a greater than 99% reduction in the energy used in his carbon footprint. Many hours had raise an alarm over increase centralization before the transition and now they completely remain. Concern did relatively few entities dominate this new proof of stake mechanism.
Martin Köppelmann, cofounder of the DeFi platform Gnosis spoke on how disappointing it is to see. The 2/3 of the steak is being controlled by the top seven entities.
In a chart he posted it shows the Ethereum staking service Lido was handling more than 27% of stake-based Ethereum validation. This was followed by Coinbase that had more than 14%.
This was all confirmed by Dune analytics in a report from Dune Analytics. It was shown that the two largest holders of the two largest stakers of Ethereum were currently Lido of with 4.16 million ETH and Coinbase with two million ETH. The remaining stake was classified as other and had 3.65 million ETH between them.
This brings into question the centralization or decentralization of the new Ethereum system. Decentralization is a major factor of crypto and Web3. The simple fact that bitcoin is completely sufficiently decentralized is the main reason that the US regulators have kept it out of their sights.
There is, of course, the risk of a 51% attack which is an attack on cryptocurrency by a group of miners in control of more than 50% of the network’s mining hash rate. Owning 51% of the nodes of the network gives the controlling parties the power to alter the Blockchain. This would mean the attackers would be able to prevent new transactions from being confirmed.
This would be able to allow them to halt payments between some or all users and transactions could be reversed that were completed, while the hackers are in control of the network there could be some reversing of l these transactions could allow users to double spin coins, which is one of the issues, consensus mechanisms like proof of work, or created to prevent.
Ethereum, becoming to senralize means there is a bigger risk of a 51% attack. Dominant parties could also be pressured to censor transactions.
There are many users who would rather stay proof of work, because they believe that proof of stake is a move towards more centralization.
To stake or pledge to the network now that Ethereum has changed, takes 32 ETH. There are not many small, investors, or retail users that have that amount smaller groups can create staking pools or combine their ETH to become validators or they could possibly join an exchange the office staking but Mika Zoltu , an Ethereumcore developer, spoke on staking with an exchange.
“You should not stick with an exchange. It hurts the net work, rather than helping, and the return on investment at the moment, probably isn’t worth it”
Zoltu has made the recommendation that uses use their own Ethereum notede when staking all this can be done on a personal computer.
In speaking of the centralization of bitcoin Köppelmann tweeted about how bitcoin also has a centralization problem.
The merge is only a day old, and there is still more to be seen about the future of Ethereum. Solana has also been questioned about its decentralization since its inception. As usual, with all of these new technologies and projects time is what will tell all.