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Buterin Admits Node Centralization is Ethereum’s Challenge as Fears Loom About Chinese Control

Last Updated September 6, 2023 1:02 PM
James Morales
Last Updated September 6, 2023 1:02 PM
Key Takeaways
  • Vitalik Buterin has outlined his vision for a more decentralized Ethereum network in which it is much easier to run validators.
  • At present, over half of all Ethereum nodes are run through hosting services operated by companies like Amazon.
  • Meanwhile, critics have speculated that Chinese firms secretly control a huge stash of ETH.

The Ethereum founder Vitalik Buterin has criticized the present state of Ethereum nodes. Pointing out that the majority of nodes are currently run through providers like Amazon Web Services, he identified node centralization as a major problem the Ethereum community needs to deal with.

In another potential threat to Ethereum’s decentralization, critics have speculated that Chinese firms secretly control some of the richest ETH wallets in existence.

The Problem of Ethereum Node Centralization

The Ethereum network is made up of computers that communicate with each other in order to validate transactions and record data about the status of the blockchain.

Each computer in the network is known as an Ethereum node. From its inception, the Ethereum community has worked to establish nodes all around the world. In order to ensure the network’s decentralization, various computers belonging to individuals, businesses, universities and other organizations all operate nodes.

However, not all computers are up to the task. In fact, to operate a full Ethereum node, Quicknode recommends  a minimum of 16 GB of RAM, a fast SSD drive with at least 1 TB of space, at least 25 MBit/s bandwidth and a fast CPU with 4 or more cores.

Due to the high technical bar node operators must meet, 57.5%  of all nodes are run through cloud hosting services. As a consequence, although there are currently 5882 Ethereum nodes in operation, over half of these are controlled by just 21 cloud service providers. 

In fact, 1805 nodes are operated via Amazon Web Services (AWS) alone, presenting a major challenge to Ethereum’s decentralization.

Vitalik Buterin on the Future of Ethereum Nodes

Speaking at Korea Blockchain Week, Vitalik Buterin discusses how to create a more decentralized Ethereum network by making it easier to run nodes.

Addressing the problem of node centralization in Seoul on Monday, September 4, Buterin observed that reducing the amount of data each node has to store would lower technical barriers for would-be operators.  

“Today, it takes hundreds of gigabytes of data to run a node… In the longer term, there’s a plan to maintain fully verified Ethereum nodes where you could literally run it on your phone,” he said .

Plans to change how Ethereum nodes handle data have already been formed. For example, the Ethereum Roadmap  identifies planned upgrades that will allow computers operating Ethereum nodes to delete historical data they no longer need.

In the immediate future, the Ethereum Foundation  is focused on data expiry as the most achievable goal for reducing the computational burden on network participants.

Looking further ahead, however, a concept known as statelessness could make it much easier to run an Ethereum node. 

Under a stateless system, not all nodes would have to access the network’s full state data. But the most ambitious vision for the future of Ethereum nodes, a concept known as “strong statelessness,” may not happen for a long time.

According to Buterin, “These technical problems will have to be addressed eventually—maybe a 10-year timescale, maybe a 20-year timescale.”

Chinese Government Wallets May Hold a Huge Stash of ETH

As well as the concentration of nodes among a few operators, another threat to Ethereum’s decentralization could come from the concentration of ETH among a small number of wallets.

In the proof of stake (PoS) era, ETH accumulation of that kind poses a major threat to Ethereum decentralization. 

Under Ethereum’s previous proof-of-work (PoW) consensus mechanism, what’s known as a 51% attack  would require a single party to control over half of all miners, thus requiring a huge amount of resources to pull off. However, with the switch from miners to stakers, to seize control of the network, attackers would need to control more than half of the circulating supply of ETH instead.

For some researchers, this prospect is especially worrying given that many of the oldest and richest Ethereum wallets remain shrouded in secrecy. Moreover, concerns have been raised recently about the role of the Chinese business conglomerate Wanxiang in Ethereum’s early history.

As the Twitter sleuth TruthLabs has observed, Wanxiang has been associated with Ethereum since its inception and likely received a portion of the 72 million ETH that was distributed to early investors.

In fact, the Chinese company has ties to Vitalik Buterin going back to 2015, when the then-CEO of Wanxiang Blockchain Labs, Feng Xia, purchased $500,000 worth of ETH from the Ethereum founder. 

For TruthLabs, Wanxiang’s deep roots  in the Chinese Communist Party (CCP) are a good reason to be suspicious of its ETH holdings. In fact, the crypto investigator speculates that the CCP is Ethereum’s biggest whale, secretly controlling as much as 66.6% Of the ETH supply.

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