The number of Ethereum validators exceeds one million, raising concerns about staking centralization

The Ethereum network recently reached an important milestone, with the number of active validators surpassing 1 million. The rapid growth of this number, especially after the Shapella upgrade, has attracted widespread attention in the market. However, the accompanying technical challenges and centralization risks have also become a focal point of discussion in the industry.

Validators, as the core of the Ethereum Proof of Stake (PoS) mechanism, are crucial for the growth of the network. However, data shows that at least 850,000 validators currently belong to users who have staked ETH by entrusting it to centralized platforms. This is mainly because most ETH holders either lack the required 32 ETH or are unable to independently complete the complex staking operations.

This phenomenon has raised concerns about the centralization of staking. With the continuous increase in network bandwidth, validators with substantial computing resources may continue to participate efficiently in validation, potentially suppressing individual self-hosted nodes. This could lead the Ethereum network to develop in a centralized direction, contrary to its fundamental principle of decentralization.

To address this challenge, Ethereum co-founder proposed an innovative plan called "anti-correlated incentives." This plan aims to enhance the decentralization and fairness of Ethereum's staking mechanism by increasing penalties for large validators that fail. Specifically, if multiple validators controlled by the same entity fail simultaneously, they will incur higher fines than individual validators.

The potential benefits of this proposal include: enhancing the economic competitiveness of solo staking relative to staking pools by encouraging the establishment of independent infrastructure for each validator, thereby promoting decentralization. Simulation results indicate that this approach may reduce the advantages of large Ethereum staking platforms, as larger entities are more likely to experience spikes in failure rates due to related faults.

In addition, the concept of "Rainbow staking" has attracted attention in the industry. This method aims to encourage diversity among service providers and may become another means of addressing the centralization issue of Ethereum. Rainbow staking is divided into heavy staking and light staking, where the former can be penalized and has signatures in each time slot, while the latter cannot be penalized and is signed through a lottery system.

The core purpose of Rainbow staking is to allow small ETH stakers to participate in network validation in a lightweight manner, partially offsetting the centralized influence of large institutions and protocols that hold a significant amount of staked ETH by increasing the number of participants. This framework may also address the emergence of dominant liquidity tokens and provide more competitive participation opportunities by enhancing the economic value of solo stakers.

Although rainbow stake still requires more research and development before becoming a viable design for Ethereum, it provides new ideas for solving the problem of stake centralization. Achieving a balance between the growth of validators and the decentralization and usability of the network remains an important challenge for Ethereum.