As a researcher with a background in blockchain technology and a keen interest in Ethereum, I find myself grappling with the ongoing debate about centralization on this influential network. The dominance of two block builders, Beaverbuild and Titan Builder, producing 88.7% of blocks over the past fortnight is undeniably concerning. This trend, primarily driven by private order flow (XOF), seems to be narrowing the competitive landscape among builders in the block auction.
During the initial fortnight of October, it was primarily two Ethereum block producers who constructed the most blocks, sparking worries about potential centralization within the world’s second-largest decentralized blockchain system.
Over the past fortnight, Beaverbuild and Titan Builder have been the primary block constructors on the Ethereum mainnet, producing approximately 88.7% of all blocks during this period, as reported by Toni Wahrstätter, a researcher at the Ethereum Foundation.
Wahrstätter wrote in an Oct. 17 X post:
“This trend is primarily driven by the rise of private order flow (XOF), sold exclusively by certain apps. XOF reduces genuine competition among builders in the block auction, leading to a smaller pool of shared transactions.”
The level of decentralization in Ethereum plays a crucial role in preserving the security of its protocol. If a significant number of transactions are controlled by centralized entities, they might potentially favor some transactions over others, contradicting the decentralized principles inherent to blockchain technology.
Not necessarily an Ethereum centralization concern — Bitget Research
According to Ryan Lee, chief analyst at Bitget Research, even though the two builders have a strong influence, it doesn’t automatically mean there are major issues related to decentralization.
Lee told CryptoMoon:
“In Ethereum’s underlying design, there is a proposer-builder separation, meaning the proposer cannot see the specific contents of the block proposed by the builder. They only choose the most profitable block from the multiple blocks proposed by builders for validation and broadcasting.”
As stated by Lee, it implies that block builders cannot give priority to particular transactions. Furthermore, he noted:
“Neither builders nor validators can control which transactions are included on-chain or which are excluded, alleviating concerns about centralization in Ethereum.
Others remain concerned despite Ethereum’s robust consensus model.
Significantly, influential validators taking advantage of Maximal Extractable Value (MEV) rewards might exert “unequal” control over the network, as suggested by software engineer Kishan Kumar in his blog post dated July 23.
“For example, if a miner controls a significant percentage of the mining power, they could reorder, include, or exclude transactions within a block to maximize their MEV, undermining the premise of decentralization.”
Does Ethereum need stronger censorship resistance?
The centralization concerns raised by the dominance of these two block builders could be mitigated through stronger censorship resistance on Ethereum, Wahrstätter added:
“This centralization would be less concerning if strong censorship-resistance guarantees were in place. While Ethereum is making progress on censorship resistance, with substantial research underway, new challenges related to centralization through XOF [private order flow] could still emerge.”
On the other hand, there has been a more than 30% increase in the number of Ethereum validators during the last year. This growth can primarily be attributed to greater institutional interest in cryptocurrencies, which is often viewed as a favorable indicator for the network’s move towards decentralization.
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2024-10-17 15:15