Many of the promises made by the merger have come true, including a more-than-99% reduction in energy consumption and carbon footprint.

Analysts who warned about increased centralization before the shift are still concerned that a small number of entities control the proof-of-stake mechanism that now underpins the blockchain.

"The top 7 entities controlling more than two-thirds of the stake is pretty disappointing to see," wrote on Twitter Martin Köppelmann, cofounder of DeFi platform Gnosis.

He shared a graph that showed Ethereum staking service Lido handling more than 27% of stake-based validation, accompanied by crypto exchange Coinbase with far more than 14%.

According to a recent Dune Analytics report, the second big Ethereum stakeholders are currently Lido (4.16 million ETH (30.1%) and Coinbase (2 million ETH (14.5%). The remaining other stakeholder group has 3.65 million ETH (26.5%).

Decentralization is a key objective of crypto and Web3. The existence that Bitcoin is "sufficiently decentralized" is the primary reason it has stayed out of the sights of US regulators.

Security experts warn that if Ethereum validation is becoming too centralized, the possibility of a "51 percent attack" becomes more than theoretical.

Furthermore, dominant parties may be pressured to censor blockchain transactions—though Coinbase CEO Brian Armstrong has stated that such a scenario would cause his company to exit the staking business.

Unlike proof-of-work, which requires a significant amount of hardware and energy to viably mine and preserve a blockchain network, proof-of-stake is more reliant on users purchasing, holding, and staking huge quantities of the network's cryptocurrency. Some critics saw the merger as a step toward centralization.

Instead of relying on miners, validators with at least 32 ETH can stake or commit to the network now that the platform is based on proof of stake. Smaller groups can form staking pools to pool their ETH and become validators, or they can join an exchange that supports staking.

Zoltu advises users to stake their ETH by running their own Ethereum node on a personal computer. "Anyone with a relatively good computer, electricity, and internet can do it," he claims.

Meanwhile, Köppelmann responded by pointing out that the top cryptocurrency, Bitcoin, also has a centralization issue. "No, dear Bitcoin fans, it is not better in Bitcoin," he tweeted. "In fact, you only need four entities to reach >72%."

Do you think that the dominance of big firms will continue into the future? Share this article on social media together with your thoughts! 

Posted 
Sep 16, 2022
 in 
Crypto News
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