Vitalik Buterin, co-founder of Ethereum, recently wrote an article titled “The Scourge: Exploring the Upgrade of MEV and Centralization in PoS Staking” to delve into how to address the issues of MEV and centralization in Ethereum’s Proof-of-Stake (PoS) network.
In the article, Vitalik discusses the risks of centralization in PoS staking, where large stakers dominate and smaller stakers are pushed to join large staking pools, resulting in higher risks of 51% attacks, transaction censorship, and other crises. Additionally, there is a risk of value extraction, where a small group of people capture value that would have otherwise gone to Ethereum users.
The main objectives of the Scourge upgrade are to minimize centralization risks in Ethereum’s staking layer, particularly in block construction and capital supply, also known as MEV and staking pools, and to reduce the risk of excessive value extraction from users.
To achieve these objectives, Vitalik outlines potential approaches for block construction and capital supply. For block construction, he mentions solutions such as FOCIL (Fork-choice-enforced inclusion lists) and APS (attester-proposer separation) that involve inclusion lists and multiple concurrent proposers to address MEV issues.
Regarding capital supply, Vitalik suggests limiting the amount of ETH that users can stake and implementing a two-layer staking model with both risky (slashable) and non-risky (non-slashable) staking options, where the former offers higher returns.
Vitalik also emphasizes that Ethereum is not just a Layer 1 solution but an entire ecosystem. Therefore, he proposes potential application-layer solutions, including specialized staking hardware, rewards for individual stakers through airdrops, decentralized block construction markets, and minimizing MEV through application and oracle designs.
Overall, the Scourge upgrade aims to mitigate centralization risks and MEV in Ethereum’s PoS network.