Ethereum Merge Draws Attention To Potential Centralization Concerns

The Ethereum Merge has been completed successfully, and the network has been using a proof of stake method for almost a week.

Many members of the community have applauded the creativity and originality of the Ethereum developers for the success of the update. However, it seems that the longer Ethereum operates as a proof-of-stake network, the more decentralization-related concerns occur.

In the months preceding up to the Ethereum Merge, the number of validators on the network increased. Given that it takes a total of 32 ETH and some technical knowledge to become a validator on the network, many investors have chosen to stake their ETH and receive rewards via pools. The majority of validators currently come from a small number of operators.

A few days following the completion of the Merge, individuals in the cryptocurrency industry have expressed concern over the centralization of the Ethereum network. The network is now far more centralized than it was when it was a proof-of-work network, according to sources.

Almost 5 million ETH of the almost 14 million ETH now staked on the network originates just from the decentralized protocol Lido Finance. The more widespread it develops, the more dangerous Ethereum’s centralization becomes. Currently, five individuals control almost sixty percent of all validators on the Ethereum network. This leaves around 36% of all staked ETH for the remaining speculators.

Stakeholders cannot increase their voting power by owning more than 32 ETH, but they may distribute their ETH among numerous validators. This gives a small number of network stakeholders huge voting power. Consequently, there are worries regarding the network’s highly centralized character with the switch to proof of stake.

In spite of what seems to be an excessively controlled network, staking on the Ethereum network has not slowed by any measure. It continues to expand and is currently close to surpassing 14 million. More than 13.8 million ETH have now been staked, securing 11.5% of the ETH supply on the network.

There were worries that large-scale dumping might occur following the Merge, however, because the withdrawal functionality was left out of the Merge, ETH cannot be withdrawn for the foreseeable future by ETH holders.

In addition, developers have said that no withdrawal methods would be implemented for the Ethereum network for at least another six months, which means that 11.5% of the total supply is projected to stay frozen until at least the first quarter of 2023. This makes ETH an enticing investment considering that a significant portion of its supply is now unusable.

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