Vitalik Buterin Proposes New Decentralization Strategy for Ethereum Staking

Ethereum co-founder Vitalik Buterin has introduced a new method to enhance the decentralization of Ethereum staking by penalizing validators for correlated failures.

Decentralization Incentives:

Buterin's proposal aims to encourage decentralized staking by penalizing validators more heavily for correlated failures. If validators controlled by the same entity fail together, they would receive a higher penalty than if they fail independently.

Rationale Behind the Proposal:

The theory is that mistakes made by a single large actor are more likely to be replicated across all the "identities" they control. Validators within the same cluster, like a staking pool, are more likely to experience correlated failures due to shared infrastructure.

Implementation and Impact:

The proposal suggests penalizing validators proportionally to the deviation from the average failure rate. This approach could reduce the advantage of large Ethereum stakers over smaller ones, as large entities are more likely to cause spikes in the failure rate due to correlated failures.

Potential Benefits:

The proposal could incentivize decentralization by encouraging separate infrastructure for each validator and making solo staking more economically competitive relative to staking pools.

Other Considerations:

Buterin also proposed different penalty schemes to minimize the advantage of large validators over smaller ones and to examine the impact on geographic and client decentralization.

Conclusion:

Vitalik Buterin's proposal aims to enhance the decentralization of Ethereum staking by penalizing validators for correlated failures, potentially making solo staking more competitive and encouraging decentralization in the Ethereum network.