Ethereum's latest hard fork, the Pectra upgrade is considered Ethereum's most feature-packed upgrade since Dencun and the most significant hard fork since the merge.
With the inclusion of 11 Ethereum Improvement Proposals (EIPs) in the Pectra upgrade, which has been widely reported to have gone through smoothly, this has evidently been a significant accomplishment for the leading L1 for smart contracts and decentralized apps developments.
For those who don't know and others that may need some memory refresher, the Merge happened on September 15, 2022 and it marked the first case of any fully-functional and heavily used blockchain transitioning from a consensus layer based on proof of work(PoW) to proof of stake(PoS).
The Dencun hard fork however came after the Merge on March 13, 2024 and introduced scaling solutions such as blobs data containers to make Layer 2 rollups more efficient.
These forks have earned lots of mentions as coming second to the Pectra upgrade across various media platforms. Since the Pectra went live on mainnet, I've seen at least 50 tweets signaling bullishness for ETH and several L2 projects talking about how this all makes the layer 2 scaling chains even more efficient.
I will say though, generally speaking, there were some good upgrades and there's a lot in there I'd be covering in future articles. Then again, everybody is talking about how smooth this was even though Ethereum is literally centralized.
I mean, let's do the math. The report % of staked ETH is 26%, so about 32M and Lido accounts for 30%, so we are looking at 9.6 million ether. Now Lido basically delegates this ETH to family firms and these fam-firms run over 300,000 validators.
And guess what? There's like 1.066M validators on Ethereum, data reveals.
What does this tell us? Well, easy, upgrading isn't going to be hard when just 1 entity accounts for more than 30% of the network's consensus stake. It's rather pretty simple.
So while what Ethereum has been working on is cool, the upgrade isn't what's impressive, that's the easy part, everything that happened before that is what's applaudable.
Speaking of centralization, let's get to what this article was meant to cover in the first place
EIP-7251 – Increasing stake limit
EIP-7251, or MaxEB, is an improvement proposal for the Ethereum network that aims to address the issue of ‘redundant validators.’
EIP-7251 proposes lifting the maximum amount a validator can stake from the current 32 ETH to 2048 ETH while maintaining the minimum staking balance limit at 32 ETH. — Unchainedcrypto.com
EIP-7251 was part of the recent Pectra upgrade which means that staking cap has effectively been increased from 32 ETH to 2,048 ETH.
As noted in the quote above, this is meant to ease up the complexities of running multiple validator nodes due to the previous low max staking limit of 32 ETH per validator.
This limit change has got people talking, but as you can imagine, we've been told that this is not a risk to decentralization.
Ethereum’s Pectra upgrade doesn’t pose a threat to decentralization, according to Mallesh Pai, senior research director at blockchain software firm Consensys, describing the update as a cleanup of the behind-the-scenes “busy work” currently handled by validators.
Pai noted that while there are about a million technical validators on Ethereum, many aren’t truly distinct — large validators often operate numerous virtual keys from a single physical machine. With the Pectra upgrade, those keys can now be consolidated — something he says they are already seeing.
“In the best case, we’ll get to about 30,000 validators,” he said, adding that this consolidation reduces auxiliary work and enables network stakeholders to focus on what matters, such as lowering gas limits. — Cointelegraph report
How true is this?
I think it all boils down to how we define decentralization because from the data onchain, Ethereum should not be considered a decentralized blockchain and by increasing the staking limit, the network just lowers the cost of centralization for its dominating stakeholders.
Lido partners can essentially go from running 300,000 validators to running just about 4,687.
This means that $23.80B in ETH stake can now run validator nodes at a very cheap rate, and that's concerning given that we are talking about 30% concensus influence. I struggle to see enough risk to compensate this much reward. Even slashing isn't going to cut it because it really has nothing to do with traditional sense of centralization.
The funny thing about this upgrade is that it is meant to attract institutions to the network.
In a simplified translation, that would mean that Ethereum has lowered the bar for institutions to step in. $23.80B is practically couch change for Wallstreet.
So while it generally may look like nothing has changed, it's now a lot cheaper to attack Ethereum and attacks can come in different forms including strategic centralization.
But of course, none of these things really matter because Ethereum had already been too centralized to care about decentralization. I would say that the chain is comfortable now because the key financial arms aren't in any serious conflicts but in an event that this happens, the mask of false decentralization would fall right off.
The increase in staking limit does infact act as a risk to decentralization but there are some cool upgrades(huge business benefits) to Ethereum through the Pectra hard fork that will be discussed in a later article.