It has been two weeks since the success of the Ethereum merge that saw the network move from a Proof of Work consensus mechanism to Proof of Stake. In this short period, Ethereum as a network and ether as a cryptocurrency has seen many new developments.
These new developments range from price action to comments by SEC chairperson Gary Gensler about the concentration of Ethereum’s new proof of stake nodes in the USA.
However, the latest hurdle in the long line that Ethereum has to cross is the issue of decentralization, and the whole point of the network itself is decentralized.
Anthony Di Iorio, the co-founder of Ethereum, has raised concerns about Proof of Stake decentralization and the issue of certain individuals gaining power over the entire network under their stakes.
What Did Di Iorio Say about Ethereum
Proof of Work consensus mechanisms is vastly different from Proof of Stake mechanisms.
While in Proof of Work, people known as miners use special computers to solve cryptographic puzzles on the network to get the rights to add a new block to the blockchain. The network first rewards whoever solves these puzzles as a “mining reward.”
As with Proof of Work, it is a constant struggle between miners worldwide, reinforcing the idea of decentralization.
Things are different with Proof of Stake mechanisms. Instead of miners, Proof of Stake networks requires validators. Users of the network only have to lock (or stake) their tokens for a fixed period. The network then chooses one of these validators simultaneously to add a new block to the chain.
Proof of Work can be a problem in this respect because the strength of a validator lies in how many tokens they have to stake.
Anthony Di Orio even states that at the moment, Proof of Stake doesn’t seem to be the perfect system, because of the dominance of a few holders with large amounts of tokens, over the rest.
Iorio even specifically pointed out that large organizations like crypto exchanges may become capable of dominating an entire network.
Water under the Bridge, or Something More Concerning
At this point, it seems that Anthony Di Iorio is not too far off the mark. After the merge, analysis of the Ethereum network has shown that only two addresses in the network hold control over about 46% of the network’s Proof of Stake nodes.
These two wallets alone account for most of Ethereum’s transaction processing, data storage, and validation, giving them a special advantage in the case of a 51% attack on the network.
Disclaimer: The author’s comments and recommendations are solely for educational and informative purposes. They do not represent any financial or investment advice. Always DYOR (do your own research)