Ethereum developers have put forward a proposal that seeks to raise the maximum stake that the network's validator nodes can control.
Ethereum, the second-largest blockchain by market cap, is considering a significant change to its network, one that could completely change the ecosystem of the network. Ethereum core developers are proposing to increase the maximum limit of ETH that can be staked on a single validator from 32 ETH to 2.048 ETH. Recall that to be a validator within the Ethereum network, we must make an immovable stake of 32 ETH within the node. This enables us to be eligible within the network's block validator selection process, in order to validate the network's operations and obtain our subsequent reward.
Initially, the current limit of 32 ETH was set to promote decentralization and prevent a single entity from gaining too much control over the networkHowever, developers now argue that The limit is now too restrictive and is preventing large-scale investors from staking.
If approved, this proposal would allow institutional investors and other large-scale participants to stake large amounts of ETH, which would increase the security and stability of the network. But at the same time, it would encourage further centralization of Ethereum, since the participation of these higher-stake nodes would give them additional advantages over smaller nodes.
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A controversial proposal
The proposal that has been presented on the portal ETH Research by the developer Michael Neuder, is being actively discussed. The idea is quite simple and is to make the maximum stake cap on the network now 2048 ETH, while keeping the minimum at 32 ETH. From Neuder's perspective, this would eliminate many inefficiencies that come from having a low maximum stake (as it currently is at 32 ETH).
To support his proposal, Neuder alludes to the fact that there are Ethereum features that would be much easier to implement if the maximum stake in nodes were raised. This is because the size of the Ethereum P2P network would become smaller (from the current 600 thousand active nodes). With this reduction of the network, the Ethereum P2P layer would free up resources to improve the finality of the blocks, the speed of synchronization of the network, and consequently its security.
At this point, the most relevant feature is the improvement in block finality. Recall that Ethereum recently had a block finality issue that developers were reviewing, due to the security problems that this may bring. The problem was solved, but it was a reminder that Ethereum has design problems that it still needs to solve after its transition from PoW (Proof of Work) to PoS (Proof of Stake).
However, despite the benefits, Neuder's proposal has a number of controversies. Among them, the possibility of a greater centralization of the network in the hands of large stakers. An example of this is that LIDO could further improve its position as a staker, since it currently manages more than 34% of all stake on the network.
Major changes to the protocol
In addition to this, Neuder clarifies that these changes must be thought through very carefully because of their impact on the Ethereum protocol. For example, subcommittees (an essential part of P2P consensus formation within Ethereum PoS) were created for use in the current state of the network and with the arrival of Ethereum sharding. Their purpose is to maintain security, as long as at least 2/3 of their nodes are honest. This means that, by design, subcommittees are susceptible to 33% attacks.
In this context, changing the staking level of nodes also alters the selection of nodes and their weight in subcommittees. This means that there is a greater danger of having malicious nodes within a subcommittee with all the security risk that this entails. While the increase is small, it cannot be ignored. Neuder mentions a more complete analysis made by user @fradamt, who analyzed these possibilities.
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Making pool management easier
However, perhaps the most felt impact of this improvement will be appreciated by pool managers like LIDO. Supervising thousands of nodes is a tedious task with enormous risks. A security problem or a minor failure can affect tens of thousands of validator nodes, with the subsequent impact on the Ethereum network and economy, and the managers of those nodes. Thus, with the increase in the limit, these operators could manage fewer validators with much higher stakes, simplifying their infrastructures, resource needs, making their operations cheaper and at the same time offering greater security for them.
Despite the gains on the administrative side, managers also face the other reality. For example, punishments for their wrongdoings could have a much larger impact. This underlines the importance of considering all possible implications on the path to improving network efficiency and validator rewards.
Meanwhile, the Ethereum network continues to operate as is, while the proposal is still being discussed on the web, waiting for consensus to be reached for its implementation, or simply being discarded for being considered risky or without major contributions to what Ethereum has already built so far.
