Will Vitalik Buterin’s Reduced Ethereum Staking Threshold Work?

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Ethereum co-founder Vitalik Buterin has unveiled a new proposal that aims to revamp the network’s staking model by reducing the validator lockup threshold from 32 ETH to 1 ETH.

According to Vitalik, this update would increase participation in Ethereum’s proof-of-stake (PoS) consensus system, making it more accessible to smaller investors and solo stakers.

Currently, Ethereum validators are required to lock up a minimum of 32 ETH to participate in securing the network. At current rates, this threshold equates to over $50,000.

Vitalik argues that this high entry point excludes smaller participants, effectively centralizing staking power within the hands of larger investors or staking pools:

“Poll after poll repeatedly shows that the main factor preventing more people from solo staking is the 32 ETH minimum. Reducing the minimum to 1 ETH would solve this issue to the point where other concerns become the dominant factor limiting solo staking.”

Techopedia explores in depth why Vitalik is pushing for the change, and what it means for Ethereum’s decentralization goals.

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Key Takeaways

  • Vitalik Buterin has proposed lowering Ethereum’s staking threshold to 1 ETH to make staking more accessible.
  • The current 32 ETH requirement equates to over $50,000.
  • Buterin also suggested implementing “single-slot finality,” reducing block finalization time from 15 minutes to 12 seconds.
  • Managing a larger number of validators with single-slot finality presents challenges, but there are potential solutions.
  • Buterin’s proposal follows another suggestion to reduce Ethereum’s block times from 12 seconds to 8 seconds.

Vitalik Proposes Implementing Single-Slot Finality

One of the biggest challenges to lowering the validator threshold is the technical complexity of managing a significantly larger number of validators.

With more validators, Ethereum’s finality time — the point at which a block is considered irreversible — could potentially slow down, leading to network inefficiencies. Currently, Ethereum takes approximately 15 minutes (or 2-3 epochs) to finalize a block.

And yet, if validators are concentrated into a small pool, decentralization takes a hit.

Sassal.Eth, an Ethereum educator with more than 250K followers, went on to say:

“Solo staking is the very beating heart of Ethereum – it is something we should defend as strongly as we defend the importance of ETH being valuable.

“Without solo staking (and the ability to run full nodes at home!), we lose the only thing that is worth anything real in this entire ecosystem – true decentralization.”

So to bring on more validators — aka reduce the staking limits — Vitalik also proposes implementing “single-slot finality,” which would reduce the finalization time to about 12 seconds. Block finalization means that a block and its transactions are considered irreversible.

In other words, block finalization ensures that once a block is finalized, it cannot be altered or reverted without a significant economic penalty to any attacker. The current system requires multiple validators to attest to a block before it is considered final, which takes more time.

“Single-slot finality involves using a consensus algorithm that finalizes blocks in one slot,” Buterin said.

“This in itself is not a difficult goal: plenty of algorithms, such as Tendermint consensus, already do this with optimal properties.”

The goal is to ensure that Ethereum’s performance improves for users, making transactions final almost instantly while simultaneously allowing the network to scale with a larger number of validators.

The Challenges of Single-Slot Finality

Achieving single-slot finality comes with several technical challenges, particularly in managing the trade-off between faster finalization and the overhead involved in processing a large number of validator signatures.

Ethereum’s current design requires every validator to sign off on two messages each time a block is finalized. As the number of validators increases, processing these signatures becomes more resource-intensive, slowing down finality and raising the hardware requirements.

Buterin outlined a few potential solutions to this problem. The Ethereum mastermind said that improving signature aggregation protocols is one of the most straightforward solutions.

Advanced techniques like Zero-Knowledge SNARKs (ZK-SNARKs) could allow Ethereum to process signatures from millions of validators in each slot without overwhelming the network’s resources.

Another more nuanced approach involves using “Orbit Committees.” This is a “new mechanism which allows a randomly-selected medium-sized committee to be responsible for finalizing the chain, but in a way that preserves the cost-of-attack properties that we are looking for.”

“Orbit takes advantage of pre-existing heterogeneity in validator deposit sizes to get as much economic finality as possible, will still giving small validators a proportionate role.

“In addition, Orbit uses slow committee rotation to ensure high overlap between adjacent quorums, ensuring that its economic finality still applies at committee-switching boundaries.”

Buterin also discussed the possibility of a two-tiered staking system, where larger stakers would provide finality while smaller stakers play a more secondary role, such as generating inclusion lists or attesting to blocks.

Ethereum Proposal Suggests Boosting Throughput by 50%

Buterin’s proposal regarding lowering the validator lockup threshold comes shortly after another developer suggested slashing block times on the Ethereum network by a third to enhance its data capacity.

Earlier this month, Ben Adams, co-founder of Illyriad Games, proposed the Ethereum Improvement Proposal (EIP)-7781. This proposal reduces block times from the current 12 seconds to just 8 seconds, potentially increasing the network’s overall throughput by 50%.

The proposal’s main goal is to improve the latency of rollups and expand the capacity of blobs, a temporary data structure designed to reduce gas fees on layer-2 networks. It also seeks to distribute bandwidth usage more evenly over time.

The Bottom Line

Buterin has suggested reducing Ethereum’s validator lockup threshold to 1 ETH in a bid to attract more stakers and make the network more decentralized.

The proposal comes as serious centralization concerns have been raised following Ethereum’s transition to PoS. That is because PoS systems reward validators based on the amount of cryptocurrency they hold and are willing to “stake” as collateral, thus incentivizing centralization.

If the proposal passes, Ethereum will take a more flexible approach to its future — but we wait and see how validators feel about the changes.

FAQs

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Ruholamin Haqshanas
Cryptocurrency Journalist
Ruholamin Haqshanas
Cryptocurrency Journalist

Ruholamin is a crypto and financial journalist with over three years of experience. Apart from Techopedia, he has been featured in major news outlets, including Investing.com, The Tokenist, Cryptonews, and 24/7 Wall St, and has also worked with some prominent crypto and DeFi projects. He holds a Bachelor's degree in Mechatronics. Ruholamin enjoys reading about tech developments, writing, and nature-watchingю