Vitalik's Research: Unequal Punishment Mechanism May Help Reduce Decentralization Issues Among Validators

Vitalik has recently increased discussions on the issue of centralization among validators, and recently published research results on a mechanism for validators' shared penalties in the Ethereum research forum, demonstrating through historical data that an unequal penalty mechanism can encourage validators to diversify their stakes through economic means.

Background: Centralization Issues of Ethereum Validators

Since the completion of the Ethereum network merge, the role of validators has become increasingly important. They are responsible for ordering transactions, producing blocks, validating blocks, reaching consensus, and other tasks. To fulfill these responsibilities, validators need to stake 32 ETH and provide sufficient hardware resources, raising the threshold for user participation. As a result, many users choose to stake their ETH to nodes like Lido or Coinbase, leading to a significant centralization issue in the current Ethereum network.

Following the completion of the Cancun upgrade, Ethereum's next important goal seems to be addressing the growing centralization issue among network validators. Vitalik and partners from the Ethereum Foundation discussed this topic at ETHTaipei, presenting various developing solutions including Verkle Trees, PBS, DVT, and rainbow staking.

In addition to existing methods, Vitalik recently proposed a new economic mechanism utilizing non-uniform penalties in hopes of reducing the centralization problem among validators.

Non-Uniform Penalty Mechanism

Introducing Common Penalties into the Non-Uniform Penalty Mechanism

Vitalik outlined a penalty scheme where if a validator behaves improperly, including accidental actions rather than normal operations, the more validators behaving improperly at the same time, measured by the total staked ETH, the greater the penalties imposed on these validators.

This theory is based on the assumption that centralized validator clusters like Lido are more likely to collectively err. If it's a single large participant, any mistakes made are more likely to be replicated across all validator accounts under its control, even if ETH is spread across many nominally independent accounts.

Through the design of the non-uniform penalty mechanism, the market is incentivized to reduce overly large validator clusters, thereby mitigating the centralization issues among validators.

Currently, this design has been implemented in the Ethereum network, but it is only applied in cases of extreme errors and rarely in normal circumstances. Therefore, Vitalik believes that applying this mechanism to more common penalties, such as missing an attestation due to disconnection or network latency causing a delay in block verification, could make this mechanism more effective.

Vitalik's Experiment Demonstrates Feasibility

However, introducing this penalty mechanism for common errors would have a significant impact on the network and requires proving a hypothesis:

Is it possible that different validators within the same validator cluster have interrelated reasons for making mistakes? This means proving that validators within the same cluster are more likely to make mistakes simultaneously compared to randomly picking validators across the network.

If the answer is negative, then the non-uniform penalty mechanism would not be feasible.

Vitalik conducted statistical analysis on historical data by writing scripts and further divided validator missing attestation errors into two scenarios to calculate more accurately and reach preliminary conclusions: centralized validator clusters are indeed more likely to simultaneously make mistakes.

He stated that in a specific non-uniform penalty model, it is indeed possible to effectively reduce the advantage of centralized validator clusters, subjecting them to greater penalties for missing attestation errors, without affecting small to medium-sized clusters of 10-300 validators and independent validators.

It is expected that this technological approach will enhance the decentralization of validators.

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