The appearance of Coinbase as the most important node operator of the Ethereum network throws concerns about network centralization that would deteriorate if the institutional adoption accelerates, the managers of the industry told cointelegraph.
On March 19, Coinbase published a report through which the US cryptocurrency exchange controlled greater than 11% of the festival ether (ETH), greater than every other Ethereum node operator.
According to Karan Sirdesai, CEO from Web3 Startup Mira Network, the growing dominance of Coinbase emphasizes “a systemic problem within the solid architecture of Ethereum”.
“We create a system through which a handful of necessary players check an awesome a part of the network security and undermine the core promise of decentralization,” Sirdesai told CoinTelegraph.
According to the report, Coinbase controlled 3.84 million ETH at 120,000 validators, which corresponds to 11.42% of the desired ether on 4 March.
According to Lido's website, Lido Lido Lido Lido controls a bigger proportion of around 9.4 million ETH.
However, Lido's firm ether is distributed in dozens of independent node operators, said Anthony Sassano, host of the Daily Gwei, in a post on March 19 on the X platform.
In order to limit the risks, Coinbase spreads the deposits in five countries and, in accordance with his report, employs several cloud providers, Ethereum customers and relays. “The diversification on the network level and the final health of the network is at all times a priority for us. That is why we commonly check the network distribution,” said Exchange.
Coinbase is the most important Ethereum node operator. Source: Coinbase
Upcoming centralization risks
Ethereum's network concentration could deteriorate if the US stock exchange funds (ETFs) are allowed to follow in keeping-a priority for asset managers comparable to black skirt.
Coinbase is the most important administrator for US crypto ETFs and holds within the name of eight of the nine US Spot -Ther Fund ETH, said the stock exchange in January.
“This style of network consolidation brings with it an increased risk of censorship and reduced network resilience,” Temujin Louie, CEO von Wanchain, a blockchain interior operability protocol, told CINTELGRAPH.
For example, high stem concentrations are “potential points of regulatory pressure … [and] These large facilities will probably advance to comply with the regulatory compliance with the resistance of the network censorship in the event that they are faced with difficult decisions, ”said Sirdesai.
In the meantime, recent US authority guidelines that enable banks to act as validators for blockchain networks, to centralize risks, said several crypto executives.
“If an excessive amount of participation consolidates are consolidated amongst regulated firms comparable to Coinbase and US banks, Ethereum will quite turn out to be traditional financial systems,” said Louie.
Conversely, institutional validators could actually improve the concentration of attitudes. According to Sirdesai, the cryptocurrency exchange Robinhood is especially well positioned to examine the dominance of Coinbase.
Robinhood already has “the crypto -infrastructure, the user base and the technical skills to find a way to quickly enable.
