One year has passed since the historic transition to the proof-of-stake system by Ethereum, leading to a noticeable decrease in energy consumption and improved network accessibility. It’s noteworthy that Ethereum’s power consumption reduced by over 99% thanks to moving from the old energy-intense proof-of-work mechanism to the proof-of-stake method. This occurs as the Ethereum network has become economically deflationary, where new Ether issuance no longer surpasses the amount removed from the supply.
However, the anticipated surge in Ethereum’s price due to this newfound deflationary pressure has failed to materialize as swiftly as some predicted. A range of macroeconomic issues, such as the banking crisis and increasing inflation, have marred these expectations. Moreover, when compared to the growth in the price of Bitcoin within the first quarter of this year, Ethereum’s growth appeared to fade.
Liquid staking providers like Lido and Rocket Pool have grown dominant since the transition to proof-of-stake, with over $19.5 billion worth of ETH currently staked through liquid staking protocols. Despite the numerous benefits of this move, including lowering entry barriers for mining, concerns about the power wielded by these providers are significant.
In particular, Lido has been criticized for controlling about 32.26% of all staked Ether, leading to fears of potential centralization of validation on Ethereum. While liquid staking ensures network governance is not exclusive to the wealthy, detractors argue that it has led to the emergence of its own set of problems. Despite this, the view remains optimistic. “Ethereum is better off with liquid staking than without it,” says Labry CEO, Lachlan Feeny.
Looking to the near future, the most pressing concern for Ethereum, and blockchain technology in general, is the increasing regulatory pressure from nations such as the United States. Alongside staking, client diversity remains a critical issue. The majority of the over 5,901 active Ethereum nodes operate through centralized web providers like Amazon Web Services. This central point of failure makes the Ethereum blockchain susceptible.
To safeguard Ethereum’s decentralized future, it needs to allow everyday users the ability to run nodes with minimum cost and hardware barriers. Addressing this would require breakthroughs in concepts like statelessness that reduces dependence on centralized servers by cutting node operators’ data needs to almost nothing. However, solutions to these centralization issues could take a decade or two and hence are likely to be long-term projects.
Source: Cointelegraph
