Vitalik Buterin recently introduced a new framework called “rainbow staking.” This framework aims to decentralize control over the Ethereum protocol by reducing the influence of the network’s largest players.

Vitalik Tackles ETH Staking Centralization at ETHTaipei 2024

Speaking at the ETHTaipei 2024 event on Wednesday, the renowned developer highlighted the overconcentration of ETH’s staked supply with centralized providers, including government-regulated exchanges like Coinbase and Binance.

Such staking providers haven’t colluded for anything nefarious so far, but the long-term risk of those entities doing so remains, according to Vitalik.

“We have become very dependent on ‘social pressure + virtue’,” said the co-founder, according to a translated report from Chinese outlet ABMedia Crypto.

“To what extent is this inevitable?” he asked. “If it is inevitable, we should be clearer about whether we rely on incentives or social pressure + virtue, rather than excessively rely on the latter.”


While solo staking without third-party providers is possible on ETH, it requires a minimum of 32 ETH to get involved.

The minimum was originally established to avoid overwhelming the blockchain with tiny stakers, and hopefully avoid excessive ETH requirements.

However, with that minimum now worth $112,000, the economic and technical barrier to entry has generated a swath of “lazy ETH holders” who delegate the task to massive third parties.

These groups also provide “liquid staking” – a service that rewards stakers with ETH-pegged tokens redeemable for their locked ETH.

At present, nearly 42 million ETH worth $145 billion is being staked on Ethereum, blockchain data shows.

What Is Rainbow Staking?

The “rainbow staking” framework, introduced by Vitalik Buterin, aims to address the issue of centralized control in blockchain networks, specifically focusing on the Ethereum protocol. The framework proposes a solution that allows solo and professional staking providers to access differentiated tiers of staking based on their specific needs and capabilities.

Traditionally, staking providers in blockchain networks have been treated as a homogeneous group, with similar expectations and requirements placed on all participants. However, the rainbow staking framework seeks to change this approach by introducing differentiation and specialization within the staking ecosystem.

One of the key aspects of rainbow staking is the ability to discriminate between heavy (slashable) and light (partially/non-slashable) clients. This means that the framework recognizes the varying levels of risk and responsibility associated with different types of clients in the staking ecosystem. By unbundling the roles played by service providers, rainbow staking allows for more focused and effective service offerings in each category, rather than expecting all providers to fulfill a broad range of responsibilities.

Rainbow staking also distinguishes between two important roles: “capital allocators” and “service operators.” Capital allocators are individuals or entities that contribute an economic stake to secure the network, while service operators are responsible for the actual validation of blocks. By separating these roles, the framework provides clarity and allows for more specialized participation in the staking process.

The introduction of rainbow staking is a significant step towards decentralizing control and promoting a more diverse and inclusive staking ecosystem. It recognizes that different stakeholders have different capabilities, risk tolerances, and roles within the network, and aims to provide tailored solutions for each category. This approach can lead to greater participation, increased network security, and a more robust and resilient blockchain ecosystem.

It’s worth noting that Binance Labs recently supported Babylon, a team working on enabling Bitcoin owners to earn staking yield on their BTC from various networks, potentially including Ethereum. This collaboration highlights the growing interest and support for staking initiatives that extend beyond a single network, further emphasizing the importance of frameworks like rainbow staking in promoting cross-network participation and interoperability.

By ailf

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