Vitalik Buterin’s Pioneering Plan to Cut Centralization in Ethereum POS

Vitalik Buterin has proposed adjustments to the Ethereum proof-of-stake (POS) mechanisms in response to combating the apparent centralization issues.  His suggestions directly address the dangers he sees in large staking pools that threaten to centralize the network and allow for transaction censorship.

Centralization Threats in the Ethereum POS System

Vitalik Buterin has stated that the Ethereum POS Centralization was a key concern for the sustainability of the blockchain. With the Ethereum POS Centralization system, validators with significant stakes are the winners; hence, smaller stakers need to opt in for larger pools. Centralization puts the system as a whole at risk and may lead to 51% attacks or transaction censorship. Furthermore, smaller players in the  Ethereum ecosystem are likely to suffer from value extraction, with dominant stakers having a disproportionate benefit over others in terms of transaction fees.

One of the major points considered is the block construction and the process that separates roles between validators as well as block builders. Buterin said the problem and one main cause of his warnings borders around super-large entities dominating in this system.

Problems with the Current  Block Construction System

The existing block construction process in Ethereum adopts a proposer-builder separation (PBS) model, where validators propose blocks and builders organize transactions. Builders fight to win the right to finalize block contents, often resulting in a few powerful entities centralizing this work. Buterin says this structure has resulted in a huge centralization of power among builders.

However, updated data shows that as of October 2024, two builders control 88% of Ethereum blocks. This power gives them the potential to blacklist transactions, especially when time-sensitive actions like liquidations in DEXs take place. This behaviour can inflate processing times to an average of 114 seconds from the regular efficiency of a block being activated in about 6 seconds, degrading the usefulness and creating spaces for price manipulation.

Vitalik’s worry here is that this concentration of power threatens the decentralization necessary for Ethereum to continue existing in any kind of meaningful usage-operation.

Solutions Proposed by Vitalik Buterin

In order to prevent the leading Ethereum POS centralization, Buterin has suggested remedies that redistribute the process of block construction. Summarising it, he suggested that proposers should select transactions instead of the builders to get rid of the monopoly of selection and ordering carried out by the builders. Under this new model, builders could still group transactions together, but they would not be able to reject individual charges outright.

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Buterin also suggests the use of inclusion lists to mitigate this. Under this scheme, a stalker will form an inclusion list at random for all valid transactions that the block builder is obliged to include when constructing the block. Builders would be able to reorder these transactions for efficiency and add more but not remove them from the inclusion list. 

Another alternative solution is to support multiple concurrent proposers (MCP), such as the BRAID model. This would eliminate the centralizers in block production and distribute power among several proposers instead of a few. The MCP approach will provide every proposer an equal opportunity to propose in order to be fair, thus ensuring that it also prevents Ethereum POS Centralization because block production does not rely on high-economy-of-scale actors.

The Role of Encrypted Mempools

Execution of encrypted mempools is another important technology needed in Buterin’s vision for more decentralization on Ethereum. Mempools are like waiting rooms where transactions are held before they get added to the block. Builders would not see the contents of these transactions until they are sealed. This would remove the ability of centralised builders to delay or censor transactions based on what impact they might have in a market.

Encrypted mempools then can only broadcast in the secure forma ensuring that transactions clear without undue interference. Builders still would put these encrypted transactions in the blocks they build, but could decrypt them only after a block is finalized. According to Buterin, they can be accomplished using cryptographic techniques like threshold decryption and delay encryption with builders unable to change the flow of a transaction.

However, even though these implementations present their own problems, Buterin acknowledges that these cryptographic solutions will be crucial to mitigating the risks of centralization even if timely decryption is difficult.

Securing Ethereum’s Decentralized Future

The roadmap for Vitalik Buterin is more about keeping Ethereum in its state of decentralisation — even as a POS system matures. Its plans for the facilitation of block production and implementation of encrypted mempools hope to solve some problems that affect Ethereum POS centralization.

These changes would ensure that Ethereum remains true to its core values and provide safeguards against being overtaken by a few large entities. Given the ever-changing nature of Ethereum over time, it must work to control these centralization threats in order for what is possibly a promising future.

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