Ethereum (ETH) co-founder Vitalik Buterin has provided an answer to the ongoing debate about the network’s transition from proof-of-work (PoW) to proof-of-stake (PoS). While some community members have expressed sadness over the transition, citing centralization concerns in PoS, Buterin argues that PoW also has significant centralization issues of a different nature. Here are the details…
A statement about altcoins from the inventor of Ethereum
The conversation started with Serotonin CEO Amanda Cassatt, who expressed concerns about centralization and power imbalances in Ethereum’s PoS system. Cassatt suggested that the transition removes key checks and balances in the ecosystem, leading to a more centralized verification process. Buterin’s response was surprising. He acknowledged Cassatt’s concerns about the centralization of PoS, but disputed the claim that PoW also suffers from centralization, albeit in a less well-known form. To support his claim, Buterin presented a chart highlighting the dominance of several mining pools during Ethereum’s PoW era.
The graph revealed a surprising concentration of mining power. Spark Pool controlled a whopping 33%, followed by Ethermine with 21%. Other players such as Zhizhu.top, Nanopool and F2Pool have also had significant impacts. Buterin suggests that the community overlooks the centralization of PoW for two reasons. First of all, everyone knew that this was a temporary phase leading to the PoS transition. Secondly, the impending migration to PoS has likely discouraged significant development of Application Specific Integrated Circuits (ASICs) for Ethereum mining as the investment would not be long-lived.
ETH switched to PoS in 2022
cryptokoin.com As we reported, Ethereum’s successful transition to PoS took place in September 2022. Since then, validators have staked 32.5 million ETH tokens on the Beacon Chain staking contract. This amount is worth a staggering $101.5 billion at the current price of $3,125 per ETH. Buterin’s statement reignited the debate on Ethereum centralization. While PoS undoubtedly offers a different type of centralization, with validators replacing miners, Buterin forces the community to consider the hidden centralization issues within the PoW system. At this point, the largest Pow coins are as follows:
Proponents of PoS argue that the staking mechanism creates a more accessible and energy-efficient system. Unlike PoW, which favors those with access to expensive mining hardware, anyone with enough ETH can participate in the security of the network. Additionally, PoS significantly reduces Ethereum’s environmental impact. Critics of PoS, however, worry about the concentration of power among large staking providers. They argue that a handful of dominant players could potentially manipulate the network, compromising its security and decentralization.
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