Expert flags risks for Ethereum after Proof-of-Stake transition

The Ethereum transition to the Proof-of-Stake consensus algorithm could make the blockchain more vulnerable to government interference and censorship. This view was voiced by Merkle Science’s lead researcher Kobi Morgan in a conversation with Cointelegraph.

According to him, the high cost of validator status threatens the consolidation of nodes by major crypto firms such as Binance, Coinbase and Kraken.

An Ethereum validator node provides the ability to store data, validate transactions, and add new blocks. To run one, you need to stake 32 ETH (approximately $47,000).

Nansen specialists calculated that four crypto platforms account for 61.25% of all ETH staked.

According to Santiment, 46.15% of the network’s nodes are linked to two addresses. Analysts from the firm noted that such dominance deserves attention.

📊 According to our #Ethereum Post Merge Inflation dashboard, 46.15% of the #proofofstake nodes for storing data, processing transactions, and adding new #blockchain blocks can be attributed to just two addresses. This heavy dominance by these addresses is something to watch. pic.twitter.com/KQdFNgGloD

— Santiment (@santimentfeed) September 15, 2022

Morgan argued that large firms would be ‘subject to the whims of governments.’ When nodes identify sanctioned addresses, they may be fined, and ultimately expelled from the system, he added.

“Either you comply with the directives and avoid such interactions […], or you risk being fined, investigated, and potentially sanctioned,” the expert stressed.

Ethereum co-founder Vitalik Buterin acknowledged the reality of the risks identified by Morgan during a developers’ call on August 18. He suggested that sanction-filtering of validator transactions could become one form of censorship in the network.

However, Buterin believes that as long as there are node operators who do not comply with sanctions, such restrictions will be temporary, and the transaction will simply end up in a later block.

On 15 September at 9:42 (Kyiv/Moscow time), developers activated the update The Merge on the Ethereum mainnet and moved it to Proof-of-Stake.

According to Paolo Ardoino, CTO of Bitfinex and Tether, the major upgrade does not solve Ethereum’s problems, including insufficient decentralization and scalability.

Follow ForkLog’s bitcoin news in our Telegram — cryptocurrency news, prices and analysis.