Vitalik Buterin Highlights Two Major Ethereum Network Risks

Ethereum co-founder Vitalik Buterin has recognized dangers, particularly in the blockchain's staking system. Buterin fears economic pressure may centralize Ethereum Proof-of-Stake. The co-founder said economies of scale in the basic Proof-of-Stake mechanism would inevitably lead to huge stakers prevailing and small stakers dropping out to join large pools. Buterin noted in a recent post that small stakers leaving to join bigger ones might increase Ethereum's risk of 51% assaults, transaction censorship, and other problems. The blockchain specialist also warned of value extraction, when a single group will take all Ethereum users' assets.

Possible futures of the Ethereum protocol, part 3: The Scourgehttps://t.co/mtzH1ZxTak

(I tried my best to be fair to all sides of the debates here!)

— vitalik.eth (@VitalikButerin) October 20, 2024

Buterin recognized two danger areas. The Ethereum co-founder said network centralization might harm block-building and staking money. Buterin claims that larger network members may run more complex block-generating algorithms to produce more cash.

Buterin said that, unlike smaller players, the same group might handle capital lockups. The Ethereum co-founder expects famous users to lease locked cash as liquid staking tokens (LST), spreading risks to smaller users. Buterin said his grasp of these issues has grown in the last year, which coincides with Ethereum's upgrade. The Dencun Upgrade in Q1 2024 increased Ethereum's scalability and efficiency with nine EIPs.

Ethereum's internal operating paradigm changed with the upgrade to Proof-of-Stake. Most Ethereum users believe the shift has yet to affect ETH, the network's native coin. TradingView showed the blockchain token trading at $2,639, 35.6% below its $4,000 annual high.