88.7% of Ethereum blocks built by 2 entities – Decentralization at risk?

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  • Two block builders produced 88.7% of Ethereum blocks, sparking centralization concerns.
  • Ethereum’s validator count rose 30%, boosting network decentralization and resilience.

As a researcher with a background in blockchain technology and a keen interest in Ethereum, I find myself both excited by its recent price surge and concerned about the emerging centralization issues. The dominance of two block builders producing 88.7% of Ethereum blocks is indeed alarming, but it’s essential to delve deeper into the matter before jumping to conclusions.

In more straightforward terms, the cryptocurrency Ethereum (ETH) has seen an upward price trend lately. At the moment of reporting, Ethereum was being traded at approximately $2,623, marking a 0.23% increase over the preceding 24 hours.

The coin mounted an impressive 8.89% increase over the past week, according to CoinMarketCap.

However, despite this optimism, concerns about network centralization have emerged.

Centralization concerns surrounding Ethereum

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For approximately two weeks in October, a large number of Ethereum blocks were constructed by just two block creators. This situation sparked concerns over potential dangers related to centralization within the second-biggest blockchain system.

The advancement has ignited a significant debate about the future safety and decentralization aspects of Ethereum.

Offering further insights on the matter, Ethereum Foundation researcher Toni Wahrstätter noted,

In the last fortnight, block builders Beaverbuild and Titan Builder accounted for a staggering 88.7% of all blocks that were constructed.

He further highlighted, 

The main cause for this pattern is the increase of exclusive transaction flows (XOF) offered only through specific applications. XOF lessens fair competition among constructors during the bidding process for blocks, resulting in fewer combined trades available.

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Other execs weighing in

In a chat with a media outlet, Ryan Lee, the head analyst at Bitget Research, noted that while two companies hold most of the market share, it doesn’t necessarily mean there are significant issues related to centralization.

He said, 

The structure of Ethereum has a division between proposers and builders, implying that the proposer remains unaware of the particular details within the block constructed by the builder.

He further noted,

From among several proposed by builders, they select the block offering the highest profitability, which is then validated and disseminated.

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In my analysis, I’ve noted that Ethereum’s transaction-processing mechanism inherently restricts miners from giving precedence or exclusion to particular transactions during the block construction phase.

Through this decentralized system, neither constructors nor verifiers possess the power to decide which transactions get included within the blockchain’s chain of blocks.

Consequently, fears about the possibility of centralization within Ethereum’s network are addressed, thereby strengthening the fundamental principles of its decentralized structure.

What is the probable solution?

In an effort to tackle the centralization issues arising due to the predominance of two block builders in Ethereum, Wahrstätter suggested improving its resistance to censorship as a possible remedy.

Enhancing the network’s ability to withstand censorship will help balance the power of a handful of influential entities, maintaining Ethereum as a truly decentralized platform that’s tough to control or manipulate.

This method is designed to preserve the network’s security and uphold its distributed structure.

However, despite the concerns around block builder dominance, ETH’s validator count has surged by over 30% in the past year.

This expansion, mainly driven by greater institutional involvement, signals a favorable progression towards the network’s decentralization.

This increase in validators suggests a more widespread distribution of power throughout the system, potentially mitigating centralization issues and enhancing the network’s overall robustness.

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2024-10-18 20:40