Ethereum co-founder Vitalik Buterin has highlighted significant risks associated with the network’s Proof-of-Stake (PoS) mechanism in a recent blog post titled “Possible Futures of the Ethereum Protocol, Part 3: The Scourge”.

Buterin emphasized how economic factors could lead to centralization, potentially compromising the network’s security. He stressed the importance of maintaining Ethereum’s decentralized nature and robust security as the platform continues to expand.

The Ethereum co-creator warned that PoS could become increasingly concentrated over time due to economies of scale, where larger stakers have advantages over smaller ones. This could result in smaller stakers exiting the process and joining larger staking pools, increasing the risk of a 51% attack and transaction censorship.

Buterin noted that major network participants might be utilizing sophisticated algorithms to optimize block construction and capture a larger share of revenue. Those with more capital can also mitigate the risks of locked capital by introducing liquid staking tokens (LSTs), effectively passing risks onto smaller participants.

He emphasized that if these potential issues remain unaddressed, they could erode Ethereum’s decentralization and security. Despite these concerns, some analysts are projecting a potential ETH price rally to new highs above $3000 by the end of October.

Buterin identified block construction and staking capital provision as two critical areas vulnerable to centralization. Larger actors could leverage superior algorithms to extract more Maximum Extractable Value (MEV) per block, gaining higher revenue than smaller actors and further incentivizing centralization.

To mitigate these risks, Buterin proposed measures based on decentralizing actual block construction. He suggested implementing “committee inclusion lists” and other mechanisms to prevent centralization in block formation, aiming to level the playing field between small stakers and large players.

Buterin also addressed the possibility of over-staking in Ethereum. With approximately 30% of total ETH currently staked, he warned that a dramatic increase in this percentage could lead to further centralization. If staking becomes more of an obligation than an option, most ETH holders might vote through centralized providers.

To counter over-staking, Buterin proposed modifying Ethereum’s issuance curve to decrease returns if staked ETH surpasses a certain threshold. This would help prevent power concentration among a small group of large ETH stakers.

In a separate post titled “Possible Futures of the Ethereum Protocol, Part 2: The Surge,” Buterin outlined plans to boost Ethereum’s transaction throughput to over 100,000 transactions per second (TPS) using data availability sampling and rollup technology. This scalability phase aims to maintain decentralization while significantly increasing network capacity.

Buterin explained that these upgrades would reduce the data each node needs to process, allowing efficient network scaling. He also called for tighter integration between Layer 1 and Layer 2 networks to create a unified Ethereum ecosystem offering seamless, scalable solutions to users.