[Vitalik Buterin highlights two major risks of the Ethereum network]
Ethereum co-founder Vitalik Buterin recently pointed out potential risks in Ethereum’s staking protocol, especially centralization issues. He believes that the economies of scale in the Proof-of-Stake (PoS) mechanism may lead to large pledgers monopolizing the market, with small pledgers exiting and joining larger pledge pools, increasing the risk of 51% attacks and transaction censorship on the network.
Buterin worries that such centralization risks value extraction, with only a few benefiting from it. Large-scale participants can run more complex algorithms, generate blocks and obtain higher returns, and at the same time can rent liquid pledge tokens (LST) to reduce the pressure of capital lock-up, which is unbearable for small participants.
He also mentioned that his understanding of these risks has deepened over the past year, which is related to the completion of the upgrade process of Ethereum. The Dencun upgrade in the first quarter of 2024 improves the network's scalability and efficiency, symbolizing the completion of Ethereum's transformation to PoS. However, despite improvements in network technology, ETH prices have yet to fully reflect these changes. ETH is currently trading at $2,639, 35.6% below this year’s high of $4,000.
