Ethereum Co-Founder Vitalik Buterin Identifies Potential Risks in the L1 Network's Proof-of-Stake Mechanism

Buterin made the highlights in an October 20 blog post, which covered the key objectives of "The Scourge," a key phase in Ethereum's roadmap.

Ethereum co-founder highlights potential risks in the network’s proof-of-stake mechanism and proposes solutions.

Vitalik Buterin has outlined potential risks in Ethereum’s proof-of-stake (PoS) network and proposed ways to resolve them. Buterin’s highlights come as part of a broader discussion on the next phase of Ethereum’s roadmap, known as “The Scourge.”

According to Buterin, the main objectives of The Scourge are to minimize risks at Ethereum’s staking layer and reduce the downsides of excessive value extraction from users.

Highlighting one of the biggest challenges the network faces, Buterin said economic pressure will naturally lead to large stakers dominating the network and smaller stakers dropping out to join large pools.

The Ethereum co-founder identified two key areas where the highlighted risks exist: block construction and stake capital provision.

Large actors can leverage advanced algorithms to extract Maximum Extractable Value (MEV) per block to gain more revenue than small actors, potentially leading to more centralization.

At the same time, “very large” actors can escape the inconvenience of locked capital by releasing it to other market participants as a liquidity staking token (LST), passing the risks to smaller actors.

Buterin believes these risks can be solved with more research on proof-of-stake economics, including ideas like implementing two-tiered staking models and slashing issuance to cap the percentage of ETH staked.

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