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Vitalik Buterin Proposes Plan to Bolster Decentralization in Crypto Staking

Vitalik Buterin, the co-founder of Ethereum, has put forward a groundbreaking proposal aimed at enhancing the decentralization and equity of the Ethereum network’s staking process, marking a significant advancement in refining the protocol.

The proposal, termed the “anti-correlation incentive” program, aims to penalize what are deemed routine errors by validators, such as failing to complete an attestation—a critical process for the network’s security and efficiency.

Buterin’s proposal is rooted in an observation within decentralized systems: errors made by one participant are often mirrored across other nodes or validators controlled by the same entity. The anti-correlation incentive seeks to discourage such uniformity in errors, thereby promoting a more distributed and resilient network structure.

At the core of Buterin’s argument is the concern that without such measures, attempts to foster decentralization could inadvertently lead to only superficial compliance. Validators might superficially diversify without genuinely distributing control or resources, thereby perpetuating centralization under the guise of decentralization.

While Ethereum already employs penalty mechanisms for serious infractions, known as slashing, these are typically reserved for egregious or malicious behavior. In contrast, the proposed anti-correlation incentive program would integrate penalties into the everyday operations of the network.

The initiative specifically targets large stakers operating numerous validators from a single location or device, aiming to mitigate the risk of widespread, correlated failures within the network.

Buterin proposes that the new program would compel these large entities to genuinely diversify their operations, thereby reducing the likelihood of simultaneous failures while still allowing them to benefit from economies of scale. The goal is to balance the advantages of scale with the need for a decentralized and resilient network.

To ensure fairness, the proposal primarily impacts large validators, with safeguards in place to prevent undue hardship on smaller participants. It ensures that punitive measures are directed where they can incentivize real change without disproportionately affecting those with fewer resources.

Buterin’s proposal comes amid growing concerns over centralization, exemplified by the dominance of platforms like Lido Finance, which, at one point, controlled over 70% of Ethereum-staked assets despite their distribution among numerous validators.

Buterin previously discussed the concept of “rainbow staking” at ETHTaipei 2024, aiming to promote diversity in service providers as a means to address Ethereum’s centralization issues further.

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