The emergence of Coinbase as the largest nodes operator in the Ethereum network raises concerns concerning the centralization of the network which could worsen as institutional adoption is accelerating, Cointelegraph told Cointelegraph.
On March 19, Coinbase published a report revealing that the American cryptocurrency exchange controlled more than 11% of the marked ether (ETH), more than any other Ethereum node operator.
According to Karan Sirdesai, CEO of the startup web3 Mira Network, the growing domination of Coinbase highlights “a systemic problem in the jealous architecture of Ethereum”.
“We are creating a system where a handful of major players control a disproportionate part of networks safety, undergoing the main decentralization promise,” Sirdesai told Cointelegraph.
According to the report, Coinbase checked 3.84 million ETH puts at 120,000 validators, representing 11.42% of the ether marked on March 4.
The Lido liquid implementation protocol controls a larger share of marked ether overall – around 9.4 million ETH, according to the Lido website.
However, Lido’s marked ether is distributed in dozens of independent node operators, said Anthony Sassano, animator of Daily Gwei, in an article on March 19 on the X platform.
To limit risks, Coinbase propagates the operations of development in five countries and employs several cloud suppliers, Ethereum and Relais customers, according to its report. “Diversification at the network level and the overall health of the network is always a priority for us. This is why we periodically check the distribution of the network,” said exchange.
Coinbase is the largest operator in Ethereum nodes. Source: Jamming
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Risks of centralization imminents
Ethereum’s network concentration could worsen if the funds negotiated by the United States (ETF) are allowed to start to mark out – a priority for asset managers such as BlackRock.
Coinbase is the largest goalkeeper of the Crypto FNB and holds ETH in the name of eight of the nine American Ether funds, the exchange said in January.
“This type of consolidation of the networks leads to an increased risk of censorship and reduces network resilience,” Wanchain CEO, an interoperability protocol of blockchain, told CoinChain.
For example, high stimulation concentrations “represent potential points of regulatory pressure … [and] These major development entities will probably prioritize regulatory membership in network censorship in the face of difficult choices, ”said Sirdesai.
Meanwhile, the new American regulatory directives allowing banks to act as blockchain network validators add to the risks of centralization, several cryptosia leaders said.
“If too much participation is consolidated under regulated entities like Coinbase and American banks, Ethereum will look more like traditional financial systems,” said Louie.
Conversely, more institutional validators could in fact improve the concentrations of intention. According to Sirdesai.
Robinhood already has “cryptographic infrastructure, user base and technical capacities to move quickly. They could question the position of Coinbase realistically more quickly than any traditional bank, ”said Sirdesai.
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