Here’s Why Ethereum Merge Could Create a Huge Centralization Problem
Ethereum is transitioning to a more sustainable structure—the lengthy-awaited Merge. The challenge, that's stated to be the culmination of almost 3 years of labour at the Ethereum blockchain, is expected to be one of the maximum pivotal occasions in the history of the crypto enterprise.
Although many agree that the Ethereum Merge has to mark a new beginning for a network already utilised by thousands and thousands, there are worries about the transition to Proof-of-Stake (PoS) and what it could imply for the blockchain's future.
The Merge as a Scalability Solution
The Merge, set to take place on Thursday, September 15, is the most significant development to hit the Ethereum blockchain since its inception and one of the biggest upgrades in the history of crypto. The Merge is expected to resolve several problems, most notably the scalability issue.
Scalability has been a problem for the Ethereum blockchain since its inception, with the blockchain designed to handle at most approximately 30 transactions per second.
Although this was, first of all, sufficient, the explosive boom of blockchains in recent years has rendered it insufficient. Hundreds of heaps of decentralized packages (dApps) are currently processing transactions on the Ethereum blockchain however it's far extensively underperforming at its modern-day throughput.
This scalability difficulty has drawn builders to several 'Ethereum Killers'—particularly alternatives like Solana (65,000 transactions per 2d) and Polkadot (more than 1,000 transactions per 2d).
However, the Merge will subsequently encompass sharding, a scalability feature that will divide the blockchain into a couple of chains. Each chain will perform independently and validate transactions on its own.
The implementation of sharding is expected to boost the blockchain's throughput to around 100,000 transactions per second, which is much better for huge transaction counts.
Staking Pools and the Centralization Challenge
Although the Merge must have no trouble with scalability, there may be one very important problem that has yet to be addressed: decentralization. The Ethereum blockchain has become increasingly centralised over the years, with a few mining pools wielding sizable electricity over the community and its consensus.
Because of the PoS consensus algorithm, the Merge needs to bring about an alternate on this, but that is best as a floor answer.
Because of the transfer to PoS, the Ethereum blockchain will see expanded capital inflows as more people look to stake their ETH and earn returns. Several major exchanges have already stated their help for ETH 2.0 staking. With extra human beings anticipated to participate, the same centralization problem that existed in PoW Ethereum may resurface in PoS.
According to a record by way of Decrypt, there were over 422,000 particular community validators on the Ethereum Beacon Chain earlier this month, all staking approximately $22.three billion worth of the asset.
A total of 33% of this amount is held in Lido Finance, a liquid staking protocol that permits humans to stake their cash without meeting the minimal 32 ETH requirement to be network validators.
Another 15% is held on Coinbase, even as 8% is held on Kraken and 7% on Binance. When these staking protocols amass a massive quantity of ETH, they'll wield even more power in the Ethereum community.
The contemporary evolution of Ethereum appears to extend some distance beyond its current platform. With numerous exchanges and protocols permitting their customers to stake ETH 2.Zero, all of these systems have grown to be active stakeholders in the long-term destiny of the blockchain.
Key decisions on those systems may also have a long-term impact on the blockchain.