Tuesday, February 20

60% of Ethereum 2.0 validators are unknown users

The staking of Ethereum 2.0, the name by which “mining” is known in a network that works under the Proof of Stake (PoS) protocol, is generating a particular behavior: more than 60% of the validators are unknown.

According data of the Beaconcha.in portal, which collects information regarding the Ethereum 2.0 network, more than 176 thousand user addresses are operating as independent validators (not linked to a staking pool), which means 64% of the total network.

Pools such as Kraken or Lido, which have the largest market share, each own 11.09% of the total number of validators.

Among the staking pools there are some decentralized ones, such as Lido. Source: Beaconcha.in.

To become a particular ‘miner’, 32 ETH must be blocked until Ethereum 2.0 is operational, which is not expected to occur until 2023.

Each validator must have this amount to be able to validate transactions on the network. This figure – as can be seen in the CriptoNoticias Calculator – amounts to more than USD 120 thousand at the time of writing this note and not accessible to most users.

Validator pools such as Kraken, Lido, Binance, among others, allow users to invest in Ethereum 2.0 staking without blocking a high amount of money, or waiting for the network to go live to withdraw their profits. The latter only applies in some pools such as Binance and Lido, for example, since others do not allow the withdrawal of liquidity while ETH 2.0 is not active.

Pools such as Lido and Binance, charge 10% commissions to the total funds invested, which have a minimum limit of 0.1 ETH, approximately USD 400. Returns are currently around 5% per year.

Despite the facilities that these pools are currently offering to their users, they have not yet achieved a good share, as most are still kept as “anonymous” validators.

Unknown validators, but not necessarily independent

With 64% of total validators controlled by unknown users, it is often assumed that these are independent. However, nothing prevents, hypothetically speaking, that all these are controlled by a single entity.

To collect the data, Beaconcha.in does a check on the Ethereum addresses that are active in staking. This accounts for each address individually, of which it is impossible to know who is the true owner of each one, if it does not state it publicly.

If the total of 64% (or, at least, 51%) were controlled by a single entity, the network could conflictSince it could make decisions about the rest of the validators, totally compromising the reliability of the network.

This type of scenario has already been criticized by Hugo Nguyen, founder of the Bitcoin (BTC) wallet Nunchuk, who recently referred to centralization on Ethereum. For that specialist, the co-creator of Ethereum Vitalik Buterin and the rest of the programmers of that network, have taken these problems very lightly.

It should be noted that the Ethereum 2.0 network is not yet fully operational, which means that new validators will probably be added over the months. The number of validators, in this last year has grown by more than 1,000%. This can be seen as a sign of decentralization.