Exploring Ethereum Reform: Vitalik's Innovation in Staking Mechanism

Author: Assad Jafri

Compiled by: Huo Huo, Shen Chao TechFlow

As the second-largest blockchain by global market capitalization, Ethereum's continued development is crucial for its vast user base, requiring ongoing adjustments to enhance decentralization, efficiency, and security.

This week, Ethereum founder Vitalik Buterin unveiled an innovative proposal aimed at refining Ethereum's staking mechanism.

Vision for Decentralized Stake

Vitalik's proposal primarily discusses the limitations of the current staking system.

Notably, he pointed out the decentralization issues surrounding the selection process of node operators for various staking pools and highlighted the inefficiencies present in the current Layer 1 consensus mechanism.

Currently, the limitations of solo staking combined with the issues of liquid staking mean that the platform can only process about 100,000 to 1 million BLS signatures at any given time. (Note: In cryptocurrency and blockchain networks, BLS signatures are used for verifying and authorizing transactions.)

In cases where accountability is pursued in signatures, requiring each signature to have a participation record complicates matters further. If Ethereum scales globally, relying solely on complete danksharding storage may still be insufficient, as each slot has a capacity of only 16 MB, accommodating approximately 64 million stakers.

Drawing inspiration from the models implemented by Rocketpool and Lido, Vitalik proposed a two-tier staking system. In this structure, node operators and delegators become the core participants.

The two-tier staking model specifically divides into:

1) A high-complexity, highly participatory but limited participant (around 10,000 people) tier that can be penalized.

2) A low-complexity, irregular participation tier that faces minimal or no penalty risks.

This model will involve modifying the validator balance limits and implementing balance thresholds to classify validators into these two tiers.

Vitalik elaborated on the potential role of small stakeholders:

1) Randomly select 10,000 small stakers for each slot, who will sign the block header of their respective slot. (Note: The block header typically contains important information about the block, such as block number, timestamp, and the hash of the previous block.) If there is a disagreement between the staker and the node operator, an error alert will be triggered, prompting community intervention.

2) A system where a delegator declares themselves online and expresses willingness to act as a small staker for a certain period. To confirm the node's message, both the node and the randomly selected delegator must agree.

3) Another method involves the delegator signaling their availability, followed by confirmation of their online status by the selected delegator. These delegators can then publish a list of included validators for block verification.

(Note: An "included list" refers to a list published by selected delegators that contains the public keys or other relevant information of recognized delegators for block verification. These delegators are chosen to participate in the block verification process by confirming their online status and availability.)

The role of small stakers is characterized by irregular participation and non-penalizable traits. Importantly, the role of small stakers addresses a significant issue: node operators potentially holding more than 51% of the majority power in the network and attempting to censor transactions. By introducing the role of small stakers, the risk of node operators concentrating control over the network can be reduced, thereby preventing them from abusing power to censor or restrict transactions. The participation of small stakers can enhance the decentralization of the network and provide greater security and censorship resistance, thus protecting users' rights.

Vitalik also considered implementing these solutions in the context of staking pool functionality. He suggested adopting a protocol that allows validators to specify two staking keys: one persistent key and one temporary key, the combination of which will determine the final confirmation process of the block.

Impact

Vitalik's proposal is not merely a technical fix but a vision for Ethereum's future. By further decentralizing the staking process and integrating safety nets, his goals are:

1) To support those lacking resources for solo staking, providing them with meaningful participation pathways.

2) To reduce the transaction processing load on Ethereum's consensus layer, making it easier for everyone to run validation nodes.

By decentralizing the staking process and embedding safeguards, the objectives become clear: to provide meaningful participation opportunities for those traditionally lacking solo staking means and to alleviate the transaction processing pressure on Ethereum's consensus layer. This helps achieve a more inclusive platform, allowing everyone intending to run a validation node to participate.

These proposals aim to achieve a balanced, decentralized, and efficiently operating Ethereum network through the principle of minimal modification combined with strategic perspectives.