Ethereum: the problem of customer diversification hits at all levels

Lack of diversification at all levels – The network Ethereum is about to undergo a major update via the transition to proof of stake. Thus, this transition, entitled The Merge, should be deployed on the mainnet in June. However, a major problem persists: that of customer diversification.

Ethereum customers

Before getting to the heart of the matter, let’s briefly review the architecture of Ethereum. Like any blockchain, Ethereum relies on a series of nodes responsible for storing transaction history as well as verifying them.

In practice, these nodes are nothing more than a computer program called customer. In the Ethereum ecosystem, there is a multitude of different implementations for these clients. These different implementations make it possible to ensure better decentralization of the network. Indeed, if one of the clients were to encounter a problem, the network remains resilient, because other clients allow its execution.

Unfortunately, in practice, the network remains dependent on certain customersbecause used by the vast majority of nodes.

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Consensus and execution layer: same fight

As the deployment of Fusionmany players in the Ethereum ecosystem, including Superphiz, have undertaken an awareness campaign regarding customer diversification.

Indeed, the beacon chain, namely the layer ensuring the consensus on Ethereum in proof of stake presents an important centralization around the customer Prism. It is operated by more than 50% of network nodes. Consequently, if the customer were to encounter a problem, the entire network could be paralyzed.

Diversification of clients on the consensus layer – Source: Clientdiversity.

For several months, the debate around customer diversification has focused primarily on the consensus layer. However, it remains just as topical on the so-called executive layer of the network.

As a reminder, The Merge aims to connect the execution layer of Ethereum as we know it, namely DeFi, NFTs and all the activity of the Ethereum network with the consensus layer in proof of stake, represented by the beacon chain.

Consequently, two types of customers will be required to communicate:

  • Clients of executive layer nodes;
  • The clients of the consensus layer nodes.

Therefore, diversification is necessary at all levels. Unfortunately, the executive layer of Ethereum faces the same issues as the consensus layer.

Thereby, 83% of executive layer nodes operate the client Geth.

Diversification of clients on the execution layer.
Diversification of clients on the execution layer.

Solving this problem is relatively trivial. This would require a significant part of node operators abandon majority customers in favor of minority customers.

In practice, this obviously concerns users operating self-hosted nodes. However, the liability relates even more significantly to companies offering node hosting services. Among them, we can cite Coinbase or Kraken, which together represent almost a third of consensus layer nodes.

If you currently use these services, you have two options:

  • Ask them to prioritize the diversification of the customers they use;
  • Change service provider to an operator sensitive to this issue.

For its part, the Ethereum community continues its quest for sacrosanct scalability. Thus, second-layer solutions, the main short-term scalability improvement, continue to grow. These have recently surpassed TVL’s $7 billionrecording a 15,000% increase since January 2021.

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