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One of the many contradictions associated with blockchain technology is that, despite touting the benefits of decentralization and freedom from third-party interference, vectors of centralization continue to emerge.
One area where this is a particular concern is the execution client software used on the Ethereum blockchain, of which approximately 70% of nodes currently use Geth. This overwhelming issue is a real concern for Ethereum stakers and the community as a whole. If consensus fails within the highest number of clients, the chain may be reorganized. For example, if executing client A accepts the reconstructed version of the chain, it doesn’t matter if other executing clients B, C, and D are wrong. But if there is an absolute majority of 66% or more confirming this, then there is a real crisis.
This may seem theoretical, but it isn’t. On January 21 of this year, a bug in Ethereum’s Nethermind client software, which blockchain validators use to interact with the network, brought down many of the chain’s key operators. Given that Nethermind supports approximately 8% of Ethereum validators, the situation was manageable and the Ethereum blockchain continued to function normally.
If Geth suffers from a bug, this could critically weaken the Ethereum blockchain. There are two breakpoints in Proof-of-Stake (PoS) blockchains: one-third disagree and two-third disagree. If more than a third disagree, the Ethereum blockchain will slow down and validators will incur an inactivity penalty. However, the situation is still manageable. However, if more than two-thirds of validators sign and vote on a block to make it part of the chain, it becomes a finalized but invalid chain. In such a situation, the Ethereum community would be forced to fork.
This problem is made more serious by the possible approval of an Ethereum-based exchange-traded fund (ETF) later this year. Potential problems could arise if institutional investors use majority execution clients for ETH staking and there are errors when certifying the blockchain. Stakers holding large amounts of ETH lose everything within a short period of time.
There is currently 28,976,695 ETH staked on the network. Of these, approximately 70% (about 20 million ETH) belongs to validators running Geth, and 16% (about 5 million ETH) belongs to validators not running Geth. To finalize a non-Geth chain, validators running Geth must burn their stake until their stake is less than 1/3 of the total remaining stake. This means that approximately 21.5 million ETH will have to be burned from these validators (about 90% of the stake), reducing the Geth stake to approximately 2.5 million ETH. This represents less than a third of the total stake of 7.5 million ETH (2.5 million). 5 million ETH added). The 5 million ETH controlled by non-Geth validators now accounts for over 2/3 of the stake and can be used to finalize the chain. This will be an extremely painful process lasting approximately 40 days. This is very significant, reducing the total supply of all ETH by about 18%, bringing the total supply to less than 100 million ETH. The potential consequences of an error occurring within Geth are too great for current stake holders to bear.
It is also important to acknowledge that this is not a problem that only Ethereum has to deal with. Other PoS blockchains have a real problem: execution client software dependency. However, Ethereum is unique in that the community is attempting to ensure greater diversity, at least in the Validator Client software, so that this is not an issue.
Digital currencies were born in the aftermath of the 2008 financial crisis. The government bailed out banks deemed “too big to fail.” It would be a cruel irony if an industry that sought to avoid the errors of traditional finance simply ended. Clone them. Few people could have predicted the financial crisis at the time. However, people are starting to realize the potential problems that can arise from over-reliance on the Geth. Unlike then, the danger is clear and the solution is at hand. As a community, we must seize the moment and monitor and maintain our Validator Client software to ensure diversity within the ecosystem for the greater good of those involved.