Vitalik Buterin is cooking up a new way to decentralize Ethereum (ETH) staking

Vitalik Buterin proposed penalizing validators based on their divergence from the average failure rate.

A technique proposed by Ethereum co-founder Vitalik Buterin penalizes validators who have correlated failures in order to incentivize better decentralization. 

On March 27, Buterin shared his opinions on promoting decentralized staking “through more anti-correlation incentives.” Multiple validators controlled by the same actor would receive a higher penalty if they failed together. “In theory, any mistake that you make as a single large actor will be replicated across all the ‘identities’ you control,” he went on to say.

The shared infrastructure of a staking pool, for example, makes it more likely that validators within the same cluster will suffer correlated failures. In the proposal, validators would be penalized proportionally to the deviation from the average failure rate. The penalty for each failure would be higher if there are many validators who fail in a given slot.

In simulations, this approach may reduce the advantage that large Ethereum stakers hold over smaller ones, since large entities are more likely to cause spikes in failure rates. Potential benefits of the approach include incentivizing decentralisation by providing independent infrastructure for each validator and making solo staking more economically viable than staking pools. Buterin advocated alternative approaches, such as different penalty schemes to reduce the average big validator’s advantage over small validators and investigating the impact on geography and client decentralisation. 

He did not mention cutting the solo staking amount from 32 Ether (ETH) to $3,570, which is now around $111,500. Staking pools and liquid staking platforms like Lido are still popular since they allow stakers to join with a little quantity of Ethereum. Lido presently has $34 billion in ETH staked, accounting for around 30% of the total supply. Ethereum enthusiasts and developers have already expressed concern over Lido’s dominance and “cartelization,” in which outsized profits can be taken relative to non-pooled wealth.

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