Vitalik has recently increased discussions on the issue of centralization among validators and published research results on the mechanism of collective punishment for validators in the Ethereum research forum. The research demonstrates that an unequal punishment mechanism can be used to incentivize validators to decentralize their staking through economic means.
Background: Ethereum Validator Centralization Issue
Unequal Punishment Mechanism
Introducing Common Punishments into the Unequal Punishment Mechanism
Vitalik’s Experimental Proof of Feasibility
Since the completion of the Ethereum merge, the role of validators has become increasingly important. They are responsible for tasks such as sorting transactions, block production, block verification, and achieving consensus. To fulfill these tasks, validators need to stake 32 ETH and provide sufficient hardware resources, which has raised the participation threshold for users. As a result, most users stake their ETH to nodes such as Lido or Coinbase, causing a severe centralization issue in the current Ethereum network.
After the London upgrade, Ethereum’s next important goal seems to be to address the growing centralization problem among network validators. Vitalik and his partners at the Ethereum Foundation have discussed this topic during their presentation at ETHTaipei, where they presented several solutions under development, including Verkle Trees, PBS, DVT, and rainbow staking.
Recommended Reading:
ETHTaipei | Ethereum’s Next Step after the London Upgrade: PBS, Verkle Trees to Address Validator Centralization Issue
Reason for Recommendation: This article provides an overview of the four main improvement solutions currently being pursued by the Ethereum Foundation to address the validator centralization issue, offering insights into the Ethereum roadmap.
In addition to the existing measures, Vitalik recently published a study on the use of unequal punishment as an economic means to reduce validator centralization.
Vitalik proposes a punishment scheme where if a validator misbehaves (including accidental errors) or operates abnormally, the greater the number of other validators misbehaving at the same time (measured by the total amount of ETH staked), the greater the punishment imposed on these validators.
This theory is based on the assumption that centralized validator clusters (such as Lido) are more likely to make simultaneous mistakes. If there is a single large participant, any mistakes made are more likely to be replicated across all validator accounts under their control, even if the ETH is distributed among many nominally independent accounts.
Through the design of an unequal punishment mechanism, the market can be incentivized to reduce excessively large validator clusters, thereby reducing validator centralization.
This design has already been implemented in the Ethereum network, but it is only applied in extreme error situations and rarely occurs in general. Therefore, Vitalik believes that if this mechanism is applied to more common punishments, such as missing an attestation due to disconnection or network delay, it may be more effective in practice.
However, introducing this punishment mechanism for general errors would have a significant impact on the network and would require the initial hypothesis to be proven: whether different validators within the same cluster are more likely to have interrelated causes of errors. In other words, it needs to be demonstrated that validators in the same cluster are more likely to make simultaneous errors compared to randomly selected validators in the network. If the answer to this question is negative, then the unequal punishment mechanism would not be feasible.
Vitalik conducted statistical analysis of historical data by writing scripts and further subdivided the error of missing attestations by validators into two cases, allowing for more accurate calculations and preliminary conclusions: concentrated validator clusters are indeed more likely to make simultaneous errors.
He also stated that in a specific model of unequal punishment, the advantage of concentrated validator clusters can be effectively reduced, resulting in greater punishment for them in the event of missing attestations, without affecting small to medium-sized clusters of 10-300 validators or independent validators.
It is expected that this technical approach can enhance the decentralization of validators.
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Ethereum Releases 2024 Roadmap, Continues Advancing Towards a Global Settlement Layer
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Attestation
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ethereum
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decentralization
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Further Reading:
Bitcoin Criticized for Centralization and Being Preferred Currency for Ransomware, Gary Gensler: Bitcoin is Just a Ledger
Interpreting Rollups Strategies: Why Mainstream Layer 2 Solutions Don’t Decentralize the Sorter and Why Introducing Stack is a Solution to Break Free.