Ethereum Proof-of-Stake Consensus Layer: Participation and Decentralization

TL;DR

This paper provides a comprehensive analysis of Ethereum's transition to Proof-of-Stake, examining participation, decentralization, and security implications through longitudinal measurement and analysis.

Contribution

It offers the first detailed longitudinal study of Ethereum's PoS consensus layer, highlighting participation dips, decentralization levels, and security concerns.

Findings

Participation dips linked to network upgrades and client issues

Ethereum PoS decentralization comparable to PoW

Liquid staking services significantly impact decentralization

Abstract

In September 2022, Ethereum transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS) during "the merge" - making it the largest PoS cryptocurrency in terms of market capitalization. With this work, we present a comprehensive measurement study of the current state of the Ethereum PoS consensus layer on the beacon chain. We perform a longitudinal study of the history of the beacon chain. Our work finds that all dips in network participation are caused by network upgrades, issues with major consensus clients, or issues with service operators controlling a large number of validators. Further, our longitudinal staking power decentralization analysis reveals that Ethereum PoS fairs similarly to its PoW counterpart in terms of decentralization and exhibits the immense impact of (liquid) staking services on staking power decentralization. Finally, we highlight the heightened security concerns in Ethereum PoS caused by high degrees of centralization.