Vitalik Buterin Warns of Ethereum Centralization Risks, Suggests Staking Cap Review

• Vitalik Buterin warns that large stakers dominating Ethereum pose risks of centralization and transaction censorship.
• Proposed solutions include staking caps and inclusion lists to maintain Ethereum’s decentralization and prevent value extraction.

In October, two entities, Beaver and Titan, were responsible for creating nearly 90% of Ethereum’s blocks, sparking concerns about centralization within the network. Ethereum co-founder Vitalik Buterin raised alarms over this issue, warning that such dominance by large stakers increases the risks of network attacks and transaction censorship.

Despite the recent Ethereum accumulation updates from CNF, with nearly 20 million ETH growth in 2024, Buterin explained the current risks:

This dominance by large stakers leads to higher risks of 51% attacks, transaction censorship, and other crises. In addition to centralization risk, there are also risks of value extraction: a small group capturing value that would otherwise go to Ethereum’s users.

Inclusion Lists and Staking Limits Proposed as Solutions

To address these centralization risks, Buterin proposed an inclusion list system, where block creation tasks are shared between proposers (stakers) and builders. In this system, the proposer selects transactions, and the builder influences their order, decentralizing block production. This solution is still under review, as the Ethereum team explores its trade-offs.

Another area of concern is staking, with 34 million ETH (around 30% of the total supply) currently staked. Buterin cautioned that such high staking activity could lead to a single liquid staking token (LST) dominating the market. To prevent this, the team is considering reducing staking rewards and capping the amount of ETH that can be staked to ensure greater liquidity distribution.

Buterin emphasized that the focus is on preventing value extraction by centralized actors and ensuring Ethereum remains decentralized. Following these updates, market sentiment around Ethereum improved, with ETH’s price gaining momentum. However, the final outcome of these proposed solutions will determine the long-term health of the network.

As of today, according to CoinMarketCap data, Ethereum (ETH) is trading at $2,732.73, having surged by 3.55% in the past day and 11.65% in the past week.