Ethereum: All about Buterin’s new staking plan to tackle THIS risk
Benjamin Njiri
Journalist
Posted: March 22, 2024
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Ethereum’s [ETH] concentration risks have become more apparent, especially as it waits for US spot ETF approval.
Even traditional finance (TradFi) has voiced concern about this risk, alluding to a zero-sum outcome if the US spot ETF gets a green light from the SEC.
In a February report, S&P Global singled out ETH staking, citing Lido [LDO] as one of the major concentration risks.
“An increase in Ether staking ETFs could affect a mix of validators participating in the Ethereum network’s consensus mechanism. The participation of institutional custodians could reduce the current concentration on the Lido decentralized staking platform.”
However, the report also noted that such a move may also “introduce new concentration risk, particularly if a single entity is chosen to stake the bulk of ether in these ETFs.”
As such, S&P Global called for consistent monitoring of concentration risk regardless of the impact of spot ETH ETFs.
Besides staking, Ethereum execution client software, especially Geth dominance, is another risk factor.
Vitalik Buterin’s “Rainbow Staking” solution
Speaking to ETH Taipei, Ethereum co-founder Vitalik Buterin mentioned a new “rainbow staking” proposal – A plan to enhance staking diversity using less than 32 ETH alongside a less overwhelming node operation.
Buterin expounded on rainbow staking, stating, “the idea here is that you explicitly split up into two kinds of staking, and you call it heavy staking and light staking.”
But he acknowledged the challenge of such a proposal;
“The less than 32 ETH part is more challenging and basically because originally 32 ETH was a compromise between not requiring too much ETH to be a staker and not having too many stakers because that would make blocks too hard to process.”
The rainbow staking proposal is in the testing phase and will take longer to be an official solution to the staking concentration risk.
Meanwhile, some leading ETH holders running validator nodes, like Coinbase, embraced the calls for Ethereum execution client diversity and migrated to NethermindETH. But Geth execution client still have a supermajority at 66%.
In the meantime, the Ethereum Foundation is under SEC probe, which could affect spot ETH ETF. However, it is yet not specified whether concentration risks are part of the probe.
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Is SEC's Ethereum investigation a planned move or a sign to curb the upcoming Ether ETFs?
Ishika Kumari
Journalist
Edited By: Ann Maria Shibu
Posted: March 22, 2024
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- Solana co-founder Anatoly Yakovenko joins hands with Ethereum against SEC.
- On the other hand, Steven Nerayoff applauds SEC’s probe into Ethereum.
The recent Security and Exchange Commission (SEC) probe into Ethereum [ETH] and its foundation has stirred speculation within the cryptocurrency community.
With Ethereum experiencing a 4% decline over the last week, concerns arise about the potential implications for spot Ether ETFs.
While some consider this as a strategic move, others believe it’s a way for the SEC to block Ethereum ETFs.
Remarking on the same, Finance lawyer Scott Johnsson noted,
“The SEC needs a non-correlation objection to deny ETH spot ETFs this year and has a desire to avoid undermining the args in the CB/Binance actions – together representing the two biggest crypto issues the agency is managing.”
Solana backs Ethereum
Joining the forces, Solana’s co-founder, Anatoly Yakovenko, said,
“If the state is against Ethereum, then I am against the state.”
The SEC is said to be gathering information from U.S. firms associated with the Ethereum Foundation, but there has yet to be an official confirmation from the regulator.
This has sent shockwaves within the crypto community over the potential impact of such a classification on Ethereum and the broader cryptocurrency market.
Despite being competitors, some members of the cryptocurrency community have emphasized the importance of harmony with Ethereum amidst the SEC’s actions.
For example, an X (formerly Twitter) user, @degengent, noted,
“ETH maxis may be idiots. But they are OUR idiots.”
Adding to harmony, ETF Store President Nate Geraci noted,
“If SEC was going to argue eth = security, the time to do it was *BEFORE* they approved eth futures ETFs last Oct…They didn’t do that.”
United by crypto, divided by opinion
On the 21st of March, U.S. Congressman Patrick McHenry also criticized the SEC’s action against Ethereum, noting it contradicts the Commodity Futures Trading Commission’s (CFTC) assessment and the SEC’s past actions.
While many are, expressing concerns with Ethereum despite their competitive relationship.
Some ETH critics, such as attorney Steven Nerayoff, known for his involvement in ETHGate within the XRP community, supported the SEC’s actions. Hence, as the situation unfolds, it remains intriguing to observe the future prospects of ETH ETFs.
