Ethereum co-founder Vitalik Buterin has introduced several proposals to address the growing issues of centralization in Ethereum’s staking and block production systems as part of the network’s ongoing “Scourge” phase.
In an October 20 blog post, Buterin expressed concerns over the trend of smaller staking pools merging into larger ones, which has led to two entities producing 88% of Ethereum’s blocks over the first half of the month.
He warned that centralization in staking poses one of the biggest threats to Ethereum’s security and could increase the risk of transaction censorship and other potential crises. He emphasized that, “One of the biggest risks to the Ethereum L1 is proof-of-stake centralizing due to economic pressures.”
While the current 30% of Ether (ETH) staked is sufficient to protect against 51% attacks, Buterin cautioned that if nearly all ETH were staked, staking would become less profitable and more burdensome for participants. This could weaken Ethereum’s slashing mechanism and allow liquid staking tokens to dominate the network’s economic incentives, reducing Ether’s influence.
To mitigate these risks, Buterin proposed capping the amount of ETH any individual can stake and limiting penalties for infractions to 12.5% of staked assets. He also suggested implementing a two-tier staking model that distinguishes between “risk-bearing” (slashable) and “risk-free” (unslashable) staking options.
Block production centralization was another focal point, as Ethereum researcher Toni Wahrstätter recently reported that two block builders—Beaverbuild and Titan Builder—produced 88.7% of all Ethereum blocks in early October. Ethereum’s current method, known as proposer-builder separation (PBS), allows builders to create blocks for validators to select based on profitability.
However, Buterin noted that this system’s specialization has contributed to the centralization problem.
Although Ethereum’s security is not in immediate jeopardy, Buterin warned that the current trend could worsen transaction censorship and result in significant delays in block inclusion. This could allow block builders to exploit users through tactics like sandwich attacks or engage in market manipulation during decentralized finance liquidations.
To counter this, Buterin proposed a “fork-choice-enforced inclusion list,” which would return the responsibility of selecting transactions to validators, while builders would only determine the transaction order. Another potential solution is “BRAID,” a method that splits block production among multiple actors, reducing the risk of centralization while still enabling profitability for participants with moderate technical capabilities.