Key Points

• Vitalik Buterin, one of the co-founders of Ethereum, has introduced a method to promote improved decentralization by penalizing connected failures among validators.

• This proposal may lead to a boost in decentralization by encouraging separate infrastructures for each validator and making individual staking more financially attractive.

Buterin, the co-founder of Ethereum, has presented a new plan to enhance the decentralization of the Ethereum platform.

The plan involves penalizing failures that are correlated among validators.

Buterin discussed his proposal on the Ethereum Research forum, emphasizing the importance of bolstering decentralized staking through the introduction of more anti-correlation incentives.

He suggested that if a group of validators, controlled by the same entity, fail simultaneously, they should face a more severe penalty than if they failed independently.

Understanding the Proposal

Buterin's concept is based on the notion that errors made by a single significant entity are more likely to be duplicated across all the identities under its control.

He observed that validators within the same cluster, like a staking pool, are more prone to experiencing correlated failures, likely due to shared infrastructure.

The proposal suggests imposing penalties on validators based on the deviation from the average failure rate.

In the event of simultaneous failures by multiple validators, the penalty for each failure would be heightened.

Simulations demonstrate that this method could diminish the advantage enjoyed by large Ethereum stakers over smaller ones.

This is because major entities are more inclined to cause spikes in the failure rate due to correlated failures.

The potential advantages of the proposal include encouraging decentralization by advocating for a distinct infrastructure for each validator.

Furthermore, it could make individual staking more economically feasible compared to staking pools.

Buterin also recommended exploring alternative penalty schemes to reduce the advantage of large validators over smaller ones.

He also proposed studying the impact on both geographical and client decentralization.

No discussion was held regarding the possibility of reducing the solo staking threshold from 32 Ether (ETH), which currently amounts to about $111,500.

Staking pools and services like Lido, which offer liquid staking, are still popular as they enable stakers to participate with a smaller amount of ETH.

Lido presently has approximately $34 billion worth of ETH staked, constituting around 30% of the total supply.

Ethereum supporters and developers have previously warned about Lido's dominance and the potential for "cartelization," where excessive profits can be extracted compared to non-pooled capital.