The merge was a significant event not just for the Ethereum network alone. The conclusion of one of the most anticipated events in history was celebrated by the whole crypto sector. Many people and a select few view the network’s switch from Proof-of-Work (PoW) to Proof-of-Stake (PoS) as revolutionary. While ETH miners and Bitcoin maximalists opposed this change, the majority of the crypto community was eager to see how it would affect the network.
Meanwhile, there has been a new discovery regarding the PoS nodes. According to Santiment’s analysis, only two addresses control 46.15% of Ethereum’s PoS nodes.
Approximately 188 blocks, or 28.97% of the nodes, have been validated by the first address hours after the Merge, and 105 blocks, or 16.18%, have been validated by the second address. The data became a contentious subject on Twitter as users discussed how the Merge would affect centralization for the biggest network in the globe.
Five firms held 64% staked Ethereum prior Merge
The blockchain analytics platform Nansen published a report before the Merge that showed five firms held 64% of all staked ETH, with Coinbase, Kraken, and Binance accounting for over 30% of ETH staked. Reports also indicated that centralized web service providers like Amazon Web Services control the majority of the 4,653 active Ethereum nodes (AWS).
Ryan Rasmussen, crypto research analyst at Bitwise, further explained,
“Since the successful completion of the Merge, the majority of the blocks — somewhere around 40% or more — have been built by two addresses belonging to Lido and Coinbase. It isn’t ideal to see more than 40% of blocks being settled by two providers, particularly one that is a centralized service provider (Coinbase).”
Since PoS rewards those with a higher token supply over those with a lower one, it is frequently thought to promote centralization. For instance, the Ethereum blockchain’s new consensus mechanism relies on validators, rather than miners, to validate transactions. Participants must stake 32 ETH, which at the time of publication is equivalent to about $48,225, in order to run a validator and be rewarded.
Supporters of PoS, however, contend that the technique is safer and more environmentally friendly than PoW. Vitalik Buterin, the co-founder of Ethereum, predicted that the transition would not only reduce energy consumption by about 95% but also help scale the network, with features that are anticipated to take place in the second half of 2023. Transaction processing is expected to match that of centralized payment processors.