OpinionHow Ethereum 2.0 is extremely CENTRALIZED

How Ethereum 2.0 is extremely CENTRALIZED

Ethereum 2.0 could be extremely centralized much more than Ethereum 1.0 still. Why the staking structure makes it that way?

Now, Ethereum’s proof of stake is different from Cardano’s proof of state Cardano’s dpos where you can delegate to any pool. Whereas Ethereum pos is not dpos and you have to have 32 Ethereum to make a validator, or you have to have 16 Ethereum to make a rocket pool node.

If you do not have 32 or 16 32 Ethereum by the way is like 60 thousand dollars 16 Ethereum is almost $30,000. Now that’s not a huge amount of money by any means, especially for people in us but it is still a good chunk of money and unless you bought in early you probably don’t have that much money.

Most Americans do not have $60,000 just lying around the house and they have other investments as well. So the thing is if you do not have that much Ethereum what you have to do if you want the staking rewards is to hand over your Ethereum to one of the large pools. Rocket pool, lido, Binance, Kraken, etc, and that means most Ethereum holders have to hand over their Ethereum to one of these big pools.

Now, this is not like cardinal dpos where you delegate to one of these pools where you keep your Ethereum in your wallet you actually have to hand it to them and they can run off with your money. It’s very unlikely that lido Binance rocky pool etc will run off with your money, but they have the coins and they have the staking slash voting power to do so. 

The thing is the top four pools lido Binance Kraken and Coinbase have roughly 55% of the staking power which means they have 55% of the voting power. Lido is sitting pretty at the top with over 30% itself. So those of you that are hoping that the governance for Ethereum 2.0 will be decentralized. It’s not decentralized at all it is very very centralized.

Yes, there are thousands upon thousands of Ethereum holders but how many node holders are there, and what is the concentration of the top pools? The concentration of the top pools validator nodes is extremely high. I don’t think any Cardano pool has over three percent of the power. Whereas the top Ethereum pool may have over 30 percent of the power.

So Ethereum dpos may not be all that decentralized because of the mass gathering at the top and that comes from the rule that you have to have at least 32 Ethereum to make a validator and 16 to make a rocket pool node. So even though the merge might help them eventually achieve their scaling goes switching to pos doesn’t help their scaling, but it makes it possible to scale.

Related: Ethereum Merge gaining institutional support

It does not make it more decentralized so you’re kind of more heading in that centralized perspective unless you change the 32 Ethereum rule. Who likes this new staking arrangement the fat cats love this new staking arrangement because it forces people to hand over their own Ethereum to the fat cats. So that’s why ethereum 2.0 can be extremely centralized and not decentralized at all.


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