Ethereum

Merge

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Ethereum’s co-founder, Vitalik Buterin, has previously acknowledged that centralization stands as one of Ethereum’s primary challenges, a puzzle that may take up to two decades to unravel fully.
According to a recent report from <a rel="noopener noreferrer nofollow" title="JPMorgan" href="https://thebittimes.com/tag/jpmorgan.html">JPMorgan</a>, the surge in Ethereum <a rel="noopener noreferrer nofollow" title="staking" href="https://thebittimes.com/tag/staking.html">staking</a> following significant network upgrades, namely the Merge and Shanghai, has come at the cost of increased <a rel="noopener noreferrer nofollow" title="centralization" href="https://thebittimes.com/tag/centralization.html">centralization</a> and decreased <a rel="noopener noreferrer nofollow" title="staking" href="https://thebittimes.com/tag/staking.html">staking</a> returns. The report, authored by <a rel="noopener noreferrer nofollow" title="JPMorgan" href="https://thebittimes.com/tag/jpmorgan.html">JPMorgan</a> analysts led by the senior managing director Nikolaos Panigirtzoglou, was released on October 5, sounding a warning about the escalating <a rel="noopener noreferrer nofollow" title="centralization" href="https://thebittimes.com/tag/centralization.html">centralization</a> risks within the Ethereum ecosystem.
Intriguingly, the report highlights that the top five liquid <a rel="noopener noreferrer nofollow" title="staking" href="https://thebittimes.com/tag/staking.html">staking</a> providers, namely Lido, Coinbase, Figment, Binance, and Kraken, collectively control more than 50% of the <a rel="noopener noreferrer nofollow" title="staking" href="https://thebittimes.com/tag/staking.html">staking</a> activities on the Ethereum network. Notably, Lido alone accounts for nearly one-third of this share.
While the crypto community has often seen the decentralized liquid staking platform Lido as a preferable alternative to centralized counterparts such as Coinbase or Binance, the JPMorgan report contends that even decentralized liquid staking platforms exhibit a significant degree of centralization. The report emphasizes that a single Lido node operator holds sway over more than 7,000 validator sets or 230,000 Ether. These node operators are selected by Lido’s decentralized autonomous organization (DAO), which is controlled by a handful of wallet addresses, resulting in a relatively centralized decision-making process.
The report goes on to mention an incident where Lido’s DAO rejected a proposal to cap the staking share at 22% of Ethereum’s overall staking, a measure aimed at averting centralization.
As the JPMorgan analysts put it, “Lido didn’t partake in the initiatives, as its DAO resoundingly rejected the proposal with a staggering 99% majority.” They further stress that centralization, regardless of its source, poses significant risks to the Ethereum network, as a concentrated number of liquidity providers or node operators could potentially serve as a single point of failure, become vulnerable to attacks, or engage in collusion that might foster an oligopolistic environment.
Beyond the concerns of increased centralization, the post-Merge Ethereum landscape has also witnessed a decline in overall staking yields, as highlighted by JPMorgan. The standard block rewards have dwindled from 4.3% before the Shanghai upgrade to the current 3.5%, while the total staking yield has decreased from 7.3% before the Shanghai upgrade to approximately 5.5% at present.
Notably, JPMorgan analysts aren’t the sole observers of Ethereum to have recognized a substantial rise in network centralization following the Merge upgrade. Executed on September 15, 2022, the Merge has been viewed as a significant hurdle to Ethereum’s decentralization and a key factor contributing to diminishing yields.
In a statement made in September 2023, Ethereum co-founder Vitalik Buterin candidly acknowledged that addressing node centralization remains one of Ethereum’s primary challenges, suggesting that finding an ideal solution could be a protracted journey, possibly spanning another two decades.
The post Higher <a rel="noopener noreferrer nofollow" title="centralization" href="https://thebittimes.com/tag/centralization.html">centralization</a> <a rel="noopener noreferrer nofollow" title="resulted" href="https://thebittimes.com/tag/resulted.html">resulted</a> from the rise of Ethereum <a rel="noopener noreferrer nofollow" title="staking" href="https://thebittimes.com/tag/staking.html">staking</a>, according to <a rel="noopener noreferrer nofollow" title="JPMorgan" href="https://thebittimes.com/tag/jpmorgan.html">JPMorgan</a> appeared first on BitcoinWorld.
Source: <a rel="noopener noreferrer nofollow" target="_blank" href="https://thebittimes.com/higher-centralization-resulted-from-the-rise-of-ethereum-staking-according-to-jpmorgan-tbt65561.html">https://thebittimes.com/higher-centralization-resulted-from-the-rise-of-ethereum-staking-according-to-jpmorgan-tbt65561.html</a>

Higher centralization resulted from the rise of Ethereum staking, according to JPMorgan

TheBitTimes

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