These days, Ethereum’s Proof of Stake development community announced a proposal to increase the maximum coins limit for validator staking from 32 to 2048 ETH.
According to some developers, the move could improve some aspects of the network and incentivize many investors to open their own node.
Full details below.
Ethereum Proof of Stake: a proposal to increase the maximum limit of validators
The introduction of the Proof-of-Stake consensus mechanism in Ethereum has opened the door to the era of staking for validators who wish to open their own node within the network.
Despite the success they have seen both in terms of the money supply being blocked for network security and in terms of achieving adequate decentralization between nodes, Ethereum developers are discussing a possible change.
In particular, Mike Neuder, a researcher at the Ethereum Foundation, has posted within the section dedicated to the discussion of protocol developments, a proposal to increase the so-called “MAX_EFFECTIVE_BALANCE” for each validator participating in the distributed consensus for the network.
Right now, the minimum and maximum that any single entity can delegate to Ethereum’s Proof of Stake corresponds to 32 ETH, although initially in the developers’ backstage, a figure approaching 2K ETH had been considered.
A few years later, the idea is back in vogue, albeit ensuring that the MINIMUM that must be staked per validator will remain the same.
In fact, the idea is to increase only the MAXIMUM that can be delegated in this process, which could go up to 2048 ETH, or 64 times the current figure
The reason for submitting the proposal lies in the fact that the process of including validators within the network could be optimized, avoiding the waste of energy.
In fact, in the queue of Ethereum validators we find that there are about 90,500 entities waiting to join the block validation group in the network, in a queue that at this rate will manage to be disposed of in over 41 days.
On the other hand, there are only a few units of validators who want to withdraw their staking and exit this process.
According to Mike Neuder, increasing the maximum limit of coins that each validator could delegate to the proof of stake would achieve a contraction of the validator set while still maintaining a high degree of decentralization and speed up the phenomenon of including new validators.
This would incentivize large investors to open their own node without having to split ETH into multiple slots in a lengthy process.
Pros and cons: value growth for Ethereum or risk of centralization
The Ethereum community discussed the proposal, unveiled on 16 June, and polarized the debate by highlighting positive and negative factors that would be created in the network’s Proof of Stake.
Among the pros we find a number of benefits that could improve the efficiency of the infrastructure and would promote ETH price growth in the long run.
More specifically, narrowing the set of validators and increasing the maximum bet limit would generate an incentive for stakers who, through auto compounding techniques, could generate compound interest on rewards, which currently can only be withdrawn and at most made to flow to another node.
Doing so, according to Neuder and his supporters, would result in more participatory democracy.
In addition, large stakers such as Coinbase would be easier to handle the large volume of customers who use the exchange as an intermediary to participate in the validation process in Ethereum.
Other positives include, as mentioned earlier, modeling a system that is more flexible and can more easily accommodate the influx of individuals into the network’s proof of stake, which would increase the security of the network.
Taken together, all of these advantages would lead to intrinsic growth of the network and consequently increased value for ETH.
On the other hand, among the cons, we find a number of motivations whose main topic is the concept of decentralization and equality of all nodes in the system.
For some members of Ethereum’s proof-of-stake community, increasing the cap for validator staking would generate A and B citizens, increasingly incentivizing large holders and disincentivizing small ones.
Although the ecosystem is sufficiently decentralized at the moment, Ethereum’s roadmap includes reaching at least 1 million nodes.
Should the update pass, it will be tough to get to the goal, as large ETH landlords would have an incentive to focus on single entities.
Even if it turns out not to be a problem for the network consensus, some of the decentralization achieved could be lost.
In addition, amplifying the yield through compounding mechanisms could adversely affect the selling pressure for the coin, which would see its market price decrease.
We will see in the coming days what decision the Ethereum community and Foundation will make and which path they prefer to pursue.