After the completion of The Merge update, Ethereum (ETH) transitioned to a proof-of-stake (PoS) consensus mechanism, which helped make the blockchain energy efficient and secure. However, mining data reveals Ethereum’s heavy reliance on Flashbots—a single server—for block building, raising fears of a single point of failure for the ecosystem.
Flashbots is a centralized entity dedicated to the transparent and efficient extraction of the Maximum Extractable Value (MEV), which acts as a relay for the delivery of Ethereum blocks.. Data from mevboost.org shows that there are currently six active relays delivering at least one block on Ethereum, namely Flashbots, BloXroute Max Profit, BloXroute Ethical, BloXroute Regulated, Blocknative, and Eden.
As shown above, of the lot, 82.77% of all relay blocks have been built by Flashbots alone – heavily contributing to the centralization of Ethereum.
A related BitMEX blog highlighted the need for a complete redesign of Flashbots or a similar system to mitigate unforeseen complications in a post-Merge era. Nevertheless, Flashbots advocates argue that the system is a decentralized autonomous organization (DAO) and will eventually decentralize on its own.
Supplementing the data related to Flashbots dominance, an analysis by Santiment Indian that 46.15% of Ethereum PoS nodes are controlled by only two addresses.
According to our #Ethereum Post Merge Inflation dashboard, 46.15% of the #proofofstake nodes for storing data, processing transactions, and adding new #blockchain blocks can be attributed to just two addresses. This heavy dominance by these addresses is something to watch. pic.twitter.com/KQdFNgGloD
— Santiment (@santimentfeed) September 15, 2022
According to our #Ethereum Post Merge Inflation panel, 46.15% of proof-of-stake nodes for data storage, transaction processing, and adding new blockchain blocks can be attributed to just two addresses. This strong dominance of these directions is something to watch out for.
“Since the successful completion of the Merger, the majority of the blocks—about 40% or more—have been built by two addresses belonging to Lido and Coinbase. It is not ideal to see more than 40% of the blocks being solved by two providers, especially one that is a centralized service provider (Coinbase)”explained Ryan Rasmussen, cryptocurrency research analyst at Bitwise.
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