“[The] The top 7 entities controlling >2/3 of the stake is quite disappointing to see tbh,” tweeted Martin Köppelmann, co-founder of DeFi platform Gnosis. It published a chart showing Ethereum betting service Lido handling more than 27 percent of stake-based Ethereum validation, followed by crypto exchange Coinbase with more than 14 percent. A recent report by Dune Analytics confirmed that the two biggest Ethereum players are currently Lido with 4.16 million ETH (30.1%) and Coinbase with 2 million ETH (14.5%). The remaining players, classified as “others”, have 3.65 million ETH (26.5%). Decentralization is a key goal of cryptography and Web3. The fact that Bitcoin is “sufficiently decentralized” is the main reason why it has remained out of the sights of US regulators. If participation in Ethereum validation becomes too centralized, security experts note, the possibility of a “51 percent attack” becomes more than theoretical. In addition, dominant parties could be pressured to censor transactions on the blockchain — though Coinbase CEO Brian Armstrong has said such a scenario would prompt his company to exit the bet. Unlike proof-of-work, which requires a significant amount of hardware and energy to profitably mine and maintain a blockchain network, proof-of-stake is more dependent on users buying, owning, and staking large amounts of the network’s cryptocurrency. Some critics have described the merger as a move towards concentration. The post-merger Nakamoto coefficient of Ethereum 2 (measure of decentralization) is 2 Most of the ETH has been staked with just 2 entities, Lido and Coinbase Solana has a score of 30 People can now accept that Ethereum is by definition more centralized than Solana 😂 pic.twitter.com/uS6no1LTH5 — xNFT S◎L Legend {6666} (@SolanaLegend) September 16, 2022 Now that Ethereum is based on Proof of Stake, validators with at least 32 ETH can stake or commit to the network, instead of relying on miners. Smaller groups can create staking pools to pool their ETH to become validators or join an exchange that offers staking. “You shouldn’t gamble with an exchange,” warned Ethereum lead developer Micah Zoltu in a recent interview with Decryptiont. “It’s hurting the network instead of helping it, and the return on investment right now probably isn’t worth it.” Zoltu recommends that users stake their ETH by running their own Ethereum node, which Ethereum holders can do on a PC. “It’s doable by anyone with a good enough computer, electricity and internet,” he said. Meanwhile, Köppelmann pointed out that leading cryptocurrency Bitcoin also has a concentration problem. “No dear Bitcoin fans, it’s not better in Bitcoin,” he tweeted. “You actually only need 4 entities to get to >72%.”
