Vitalik Buterin Proposes Ethereum Staking Improvement

Ethereum co-founder Vitalik Buterin has introduced a proposal to improve the decentralization and fairness of the Ethereum network’s staking process, marking a significant advancement in refining the protocol.

The “anti-correlation incentive” program aims to penalize common mistakes made by validators, such as failing to complete an attestation, which is crucial for the network’s security and efficiency.

One of the key observations driving Buterin’s proposal is that errors made by one participant tend to be replicated across other nodes or validators controlled by the same entity. The anti-correlation incentive seeks to discourage this pattern of errors, promoting a more distributed and resilient network structure.

While Ethereum already has penalty mechanisms in place for serious infractions (slashing), these are typically reserved for severe or malicious behavior. The proposed anti-correlation incentive program would introduce penalties into the routine operations of the network.

Buterin’s proposal specifically targets large stakers who operate multiple validators from a single location or device, which can lead to widespread, correlated failures within the network. The program aims to encourage these large entities to diversify their operations genuinely, reducing the risk of simultaneous failures while still benefiting from economies of scale.

To ensure fairness, the proposal focuses primarily on large validators, with safeguards in place to prevent undue burden on smaller participants. This approach aims to direct punitive measures where they can drive meaningful change without disproportionately impacting participants with fewer resources.

Buterin has also discussed “rainbow staking” at ETHTaipei 2024, an event held from March 21 to 24. This concept promotes diversity in service providers to address Ethereum’s centralization concerns further.

His worries about centralization were heightened by the dominance of platforms like Lido Finance, which, at one point, controlled over 70% of Ethereum-staked assets despite being distributed among numerous validators.

Lido recently faced a $35k penalty as 20 validators violated Ethereum’s rules, underscoring the importance of initiatives like the anti-correlation incentive program in promoting a decentralized and resilient network.