The number of Ethereum validators has surpassed one million, raising concerns about stake centralization.

The number of active validators on the Ethereum network recently surpassed 1 million, a milestone that has attracted widespread attention in the market. Validators, as a core component of Ethereum's Proof of Stake (PoS) mechanism, have seen a significant increase in their numbers, especially after the Shapella upgrade, which has brought both excitement and some concerns.

Data shows that on March 28, the number of Ethereum validators reached the significant milestone of 1 million. The focus of community discussions is centered on the growth of the validator pool, especially after the Shapella upgrade implemented flexible withdrawals, which is seen as a key step for Ethereum's evolution towards a more efficient and scalable network. However, with the increase in the number of validators, each validator needs to independently download the latest data and verify state changes within a limited time, which means more powerful computing capabilities are required to handle larger data blocks.

Statistics show that there are currently at least 850,000 validators coming from users staking ETH with centralized platforms. This is mainly because most ETH holders either do not have the required 32 ETH or are unable to manage the complex staking operations. This phenomenon has raised concerns about the increasing risks of centralization. If the continuous growth of network bandwidth allows validators with substantial computational resources to participate efficiently, it may lead to institutional-owned data centers suppressing individual self-hosted nodes, thereby pushing the Ethereum network towards centralization, which contradicts its fundamental philosophy.

It is important to note that validators do not represent a single entity. Running a validator requires 32 ETH, but a single server can run multiple validators. While Ethereum's transition to a PoS validation mechanism is crucial for improving efficiency, maintaining a balance between the growth of the number of validators and the fundamental principles of network decentralization and availability remains an important challenge.

The "anti-correlation incentive" proposal addresses centralization risks

To address the issue of validator centralization, Ethereum co-founder proposed an innovative plan called "anti-correlated incentives." This plan aims to increase the penalties for large validators who fail, in order to enhance the decentralization and fairness of the Ethereum staking mechanism.

The relevance failure of the Ethereum network may undermine the decentralized nature of the system due to controlling multiple validators from a single location. The "anti-correlation incentive" program encourages validators to expand their activities by penalizing them for relevance failures.

According to this proposal, if multiple validators controlled by the same entity fail simultaneously, they will incur higher penalties than if a single validator fails, as any errors of large validators will be replicated across all identities they control. For example, validators in the same cluster (such as staking pools) are more likely to experience correlated failures, possibly due to shared infrastructure.

The proposal suggests implementing corresponding penalties for validators that deviate from the average failure rate. If multiple validators fail within a given time period, the fines for each failure will be higher.

The simulation results indicate that this approach can reduce the advantages of large Ethereum stake platforms, as large entities are more likely to experience a surge in failure rates due to related faults. The potential benefits of this proposal include promoting decentralization by encouraging the establishment of independent infrastructure for each validator and enhancing the economic competitiveness of individual stakes relative to staking pools.

In addition, other options have been proposed, such as different penalty schemes, to minimize the advantages of large validators and assess the impact on geographic and customer decentralization.

Although Ethereum has penalty mechanisms like slashing to address serious violations, these mechanisms are typically used to deal with extremely malicious or severe behaviors. The new proposal incorporates penalties into regular network operations, emphasizing the promotion of genuine diversity among validators. This strategy aims to ensure efforts to enhance decentralization and promote substantive change, rather than mere superficial compliance.

"Rainbow Stake": A New Approach to Address Centralization

At the recent Ethereum conference, the concept of "Rainbow staking" was proposed as a potential solution to the centralization issues faced by Ethereum. This approach aims to encourage diversity among service providers, with a particular focus on staking platforms that hold a large amount of Ether assets, such as a certain liquid staking protocol (which accounts for 7% of the total ETH circulation).

Currently, the number of individual validators (solo stakers) in the Ethereum network is insufficient, mainly due to technical challenges (such as running their own nodes) and financial constraints (holding less than 32 ETH). Therefore, many users who wish to stake ETH can only earn rewards through liquid staking solutions.

Rainbow staking is divided into heavy staking and light staking. Heavy staking is forfeitable and has signatures in each time slot. In contrast, light staking is non-forfeitable and is signed through a lottery system. This method attempts to combine the security of both staking methods and may require both to sign on the same block to ensure finality of the block.

A partner of a certain non-custodial staking service pointed out that in the past, small stakers were essentially in a "role deficiency" state in the ETH network validation work. The core goal of Rainbow Staking is to allow small ETH stakers to participate in network validation in a lightweight manner. By increasing the number of participants, it partially offsets the centralized impact of major institutions and protocols holding large amounts of staked ETH.

The Rainbow staking framework can also cope with the emergence of dominant liquidity tokens (which may replace ETH as the primary currency on the Ethereum network). It is also designed to provide competitive participation by enhancing the economic value of individual staking.

However, the co-founder of Ethereum pointed out that more research and development work is needed before Rainbow staking can become a viable design for Ethereum. He believes that the biggest challenge is not even on a technical level, but rather on a philosophical level.