Ethereum’s Scourge Upgrade to Combat Staking Censorship Risks

Vitalik Buterin, co-founder of Ethereum, has provided updates on the upcoming upgrade in Ethereum’s technical roadmap – The Scourge.

This upgrade is designed to address centralization issues related to Ethereum’s staking and block creation. Buterin has outlined several strategies to mitigate these challenges faced by the layer-1 blockchain.

Ethereum’s Scourge Aims to Minimize PoS Centralization

After Ethereum’s Merge upgrade in late 2022, the smart contract blockchain shifted from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. This transition enabled ETH holders to stake their assets for additional rewards, facilitate block creation, and enhance network security.

Although this feature has benefitted the ecosystem, Buterin noted that the centralization of staking is “one of the biggest risks” for the L1 blockchain, suggesting that it could lead to further complications within the network.

In a blog post dated October 20, Buterin emphasized that the economies of scale present in PoS models can result in large staking pools dominating the market, as smaller stakers tend to gravitate towards these larger entities.

Currently, approximately 30% of ETH’s total supply is being staked. Buterin pointed out that this level is sufficient to safeguard the blockchain from a 51% attack. However, if this proportion rises significantly, various risks may emerge, such as staking evolving into a “duty” for all ETH holders, a singular liquid staking token (LST) potentially claiming the majority of the stake, and the possible degradation of the “money” network effect and the reliability of the slashing mechanism.

To address these concerns, the Ethereum co-founder proposed a cap on the amount of ETH each individual can stake and limiting staking penalties to 12.5% of the staked coins. Buterin also suggested the idea of two-tier staking, segregating staked ETH into slashable and unslashable categories.

The Scourge to Resolve Block Production Issues

On the topic of Ethereum’s block production, an Ethereum Foundation researcher revealed that two entities, Beaverbuild and Titan Builder, were responsible for producing 88.7% of ETH blocks during the initial two weeks of this month, raising alarms about centralization.

At present, Ethereum employs a proposer-builder separation mechanism for block production, where builders create blocks that proposers then review. Buterin remarked that participants engaged in “specialized” roles can easily become centralized.

He indicated that while Beaverbuild and Titan Builder do not have the capacity to independently censor transactions since they don’t manage 100% of the network’s blocks, there remains a risk of transactions encountering delays of up to 114 seconds rather than the typical 6 seconds. Such delays could pose significant risks for time-sensitive transactions and open the door to sandwich attacks.

To tackle these challenges, the Ethereum creator proposed two potential solutions. One involves the fork-choice-enforced inclusion lists (FOCIL) strategy, where proposers or stakers choose transactions, while builders determine the order of these transactions and “add new transactions.”

The alternative approach aims to implement multiple concurrent proposers (MCP) schemes, such as BRAID, distributing “the block production process across numerous participants, ensuring that each proposer only needs a moderate level of sophistication to maximize their earnings.”