Weekly SmartPills #27
JP MORGAN: ETHEREUM'S DECENTRALIZATION IS FAILING
In a report published Oct. 6, 2023, JP Morgan said Ethereum's decentralization is waning. The report, titled “Ethereum: Declining Decentralization,” argues that Ethereum's move to Proof-of-Stake (PoS) has centralized the network in the hands of a small number of validators. JP Morgan argues that the move to PoS has made it easier for large ETH holders to purchase and maintain enough tokens to become validators.
This has led to a concentration of power in the hands of a small number of entities, including investment funds, trading firms and large financial institutions. The JP Morgan report cites a variety of data to support its arguments. For example, the report notes that the number of validators on Ethereum has decreased by more than 50 percent since 2021.
In addition, the report notes that 60 percent of Ethereum's computing power is now controlled by a single service provider, Infura. JP Morgan's report drew mixed reactions from the Ethereum community. Some have argued that JP Morgan's arguments are exaggerated and that Ethereum remains a decentralized network. Others said the report raises legitimate concerns about Ethereum's future decentralization.
Ethereum's decentralization: a real problem?
Decentralization is one of the core principles of Ethereum. The network is designed to be decentralized so that it is resistant to censorship and attacks. The move to PoS has introduced some risks to Ethereum's decentralization. In particular, the JP Morgan report raises concerns that the concentration of power in the hands of a small number of entities may make it easier for these entities to controlthe network.
However, it is important to note that Ethereum decentralization is a complex concept. There is no single way to measure the decentralization of a network. Moreover, decentralization is a dynamic process that can change over time.
JP Morgan's report is an important contribution to the debate on Ethereum decentralization. The report raises legitimate concerns that should be considered by the Ethereum community.
The debate over decentralization of Ethereum is likely to continue in the coming years. The Ethereum community will need to address the challenges posed by the move to PoS and find ways to keep the network decentralized and resilient.
There are a number of factors that could contribute to greater decentralization of Ethereum. For example, the growing interest in decentralized finance (DeFi) could lead to greater participation by users and developers. In addition, the improvement of the technology could make it easier for anyone to become a validator.
However, it is also possible that Ethereum's decentralization will continue to decline. Should the concentration of power in the hands of a small number of entities continue, it may become more difficult for Ethereum to fulfill its promise of being a decentralized network. Only time will tell whether Ethereum's decentralization will be able to withstand the challenges posed by the shift to PoS.