Ethereum Сentralization

The Merge has recently been successfully completed. Now Ethereum is fully working on Proof-of-Stake. But, there are elements that make us doubt about the decentralization of the Ethereum network.

As we have already written recently, more than half of the Ethereum network node providers are located on three large cloud providers. This already raises questions about the decentralization of Ethereum. Now, with the full transition to PoS, there is another threat of decentralization.

On September 15, the long-awaited transition of Ethereum to Proof-of-Stake (PoS) – The Merge happened. We wrote about it recently. Presently, the Ethereum network is controlled using validator nodes. In theory, validator nodes should be evenly spread among network users. But in fact, most of the validator nodes are spread among several major market players.

Analysts from the Santiment platform conducted a study and found very interesting data. As it turns out, 46.15% of PoS nodes, which are used to store data, conduct transactions and add new blocks to the blockchain, belong to only two addresses. Just imagine, 46.15% are distributed between just two addresses! This is completely contrary to decentralization.

Data that is alarming also appeared after a deal was made under the name “Project North Star". In the course of this deal, JPMorgan Chase received an influential stake in Metamask and Infura, large elements of the Ethereum infrastructure. According to a PR Newswire press release, JPMorgan is making a large profit from these assets and most importantly, they control these assets.

“This intellectual property was used to raise funding for CSI at a valuation of $3 Billion, with rumours of a $7 Billion valuation for the current round.”

Independent analysts also noticed threats to the decentralization of Ethereum. Chris Remus, an employee of Chainflow, shared data on Twitter that Lido, Coinbase and Kraken own more than 50% of stake.

As Chris Remus correctly noted, two of these companies are centralized crypto exchanges.

The fact that Lido, Coinbase and Kraken own more than half of the stake suggests that Ethereum may be subjected to a "51% attack" in the event of collusion between these companies. This of course, is not probable. But, there is a possibility. In addition, the inclusion of other owners of large “parts of the pie" is also alarming. We hope that Ethereum will be able to cope with the problem of centralization and continue to observe.