Proof of Stake After the Merge

Decentralization is a security metric, not a marketing slogan. Post-Merge, stake concentration is the primary attack vector.

• Lido, Coinbase, Binance control >50% of staked ETH.
• This creates systemic risk of censorship and MEV extraction.
• True decentralization requires penalizing large pools and fostering solo staking.

Liquid staking tokens (LSTs) like stETH create a recursive dependency that weakens the base layer.

• $30B+ TVL in LSTs creates a "too big to fail" derivative market.
• DeFi protocols over-collateralize with stETH, creating correlated failure modes.
• The solution is protocol-enforced LST diversity and limiting LST dominance in consensus.

Geth's ~85% dominance is a single point of failure. A consensus bug could halt the network.

• Supermajority clients like Prysm have triggered chain splits before.
• The solution isn't pleading—it's economic incentives for minority client operators and slashing penalties for supermajority client failures.
• Infrastructure like Erigon and Nethermind need protocol-level support.

Liquid staking derivatives (LSDs) like Lido's stETH create a single point of failure. Re-staking protocols like EigenLayer compound this risk by layering new cryptoeconomic security on the same capital, creating systemic contagion pathways.

• Lido commands ~30% of all staked ETH, nearing the 33% censorship threshold.
• Re-staking amplifies slashing risk; a failure in an AVS (Actively Validated Service) could cascade to Ethereum core consensus.

Maximal Extractable Value (MEV) has professionalized block building, creating a centralized oligopoly. The proposed PBS solution is untested at scale and may fail to decentralize power.

• Top 3 builder relays produce ~90% of blocks.
• Without effective PBS, validators are incentivized to outsource to the highest-bidding centralized builder, undermining censorship resistance.

Ethereum's weak subjectivity requires users to sync with a trusted checkpoint every few months. A successful long-range attack could force a social consensus fork, breaking the "trustless" promise.

• Recovery relies on off-chain coordination and community vigilance.
• This is a fundamental trade-off of PoS vs. Bitcoin's PoW, which is objectively secure from genesis.

Enterprise staking providers like Coinbase and Kraken are regulated entities subject to OFAC sanctions. Their growing share creates a vector for state-level censorship enforced at the protocol layer.

• Coinbase is a top-5 solo validator entity.
• Compliance could mandate filtering transactions, leading to a censorship-driven chain split.

Ethereum's security budget is its staking yield, paid in inflationary ETH. In a bear market or during high competition, this yield may be insufficient to secure its $400B+ market cap, creating an economic vulnerability.

• Solana offers cheaper blockspace with sufficient decentralization for many apps.
• If activity migrates, Ethereum's fee revenue and staking appeal decline, creating a negative security feedback loop.

Over 85% of validators run the Geth execution client. A critical bug in Geth could take down the majority of the network, causing mass slashing and chain instability.

• This is a pre-Merge risk that persists, despite years of warnings.
• Solutions like Nethermind and Besu have failed to gain sufficient market share, highlighting ecosystem complacency.

EigenLayer and protocols like EigenDA turn staked ETH into a reusable security primitive. This creates systemic risk but unlocks new cryptoeconomic designs.\n- New Risk: Slashing cascades can now propagate across AVSs.\n- New Tool: Bootstrap security for new chains/DA layers with ~$15B+ in pooled capital.

Proposer-Builder Separation (PBS) and MEV-Boost formalize block building as a competitive market. Builders like Flashbots and bloxroute dominate.\n- Guaranteed: Validators extract ~$2M+ daily via MEV.\n- Design Implication: Your dApp's transaction ordering is a financial product; design for it.

Lido (stETH), Rocket Pool (rETH), and Coinbase (cbETH) control ~35% of all staked ETH. This centralizes consensus influence but provides deep liquidity.\n- Risk: Governance attacks on Lido could threaten chain finality.\n- Opportunity: Build on LSTs as the base money layer for DeFi (e.g., Aave, Maker).

Post-merge, validator rewards are ~3-4% APR from issuance + tips. This creates intense pressure to optimize for MEV and run cost-efficient infrastructure.\n- Hard Cap: Solo staking requires 32 ETH and DevOps skill.\n- New Biz: Node services (Figment, BloxStaking) and SaaS tools (DappNode, Eth-Docker) are critical.

Ethereum moved from probabilistic to provable finality in ~12-15 minutes. This enables new trust assumptions for bridges and cross-chain apps.\n- Use It: Light clients can verify state with ~1 MB of data.\n- Beware: Re-orgs are still possible before finalization, affecting fast withdrawals.

Geth still commands ~80% of execution client market share. A critical bug could take down the network. This is a major protocol risk.\n- Action: Diversify to Nethermind, Besu, or Erigon.\n- Incentive: Some pools offer bonuses for minority client use.