Is Ethereum Decentralized Enough and Will It Become Worse After POS Upgrade?

Is Ethereum Decentralized Enough and Will It Become Worse After POS Upgrade?

The idea of Ethereum to become the “internet of currency” has been widely accepted by everybody in the crypto space. Not only that, but Ethereum has also been overused as the platform for various different trends since 2017. Do you still remember CryptoKitties? Or do you remember the ICO craze in Q4 2017? All of these trends didn’t last very long but they helped Ethereum to confirm its place in the eyes of crypto enthusiasts.

Since then until today, Ethereum has been able to remain relevant in the runner up position (only behind Bitcoin). Fast forward to 2020, Ethereum, once again, is being utilized for the latest bull craze in the crypto space. Yep, this time it’s DeFi’s turn to steal crypto headlines. DeFi stands for decentralized finance, and it is the most hyped industry in the crypto market at the moment. Ethereum’s DeFi protocols are far more popular than others. And don’t forget that most stablecoin transfers are currently happening on Ethereum blockchain.

However, the usage of Ethereum for anything popular in the crypto market has been widely questioned by crypto maximalists. They believe that Ethereum is simply not decentralized enough and it will only get worse once Ethereum fully migrates to Ethereum 2.0 and Proof-of-Stake (PoS) consensus mechanism. Is this true? Let’s analyze it from each argumentative point.

How Decentralized Is Ethereum?

The biggest argument that often comes to Ethereum skeptics is the node distribution. Yep, many skeptics call out Ethereum for being not decentralized enough when it comes to node distribution. The source? Well, thenextweb claimed that 5,499 nodes out of total 8,933 Ethereum nodes were hosted in the cloud back in September 2019. And in terms of percentage, 25% of all nodes were hosted in Amazon Web Services (AWS).

This argument has a point but not strong enough. While it’s true that the nodes were/are centralized in AWS and other centralized solutions, the owners of these nodes are still different people and entities. Think of it like this. If you and I use AWS, both of us still have different legal rights to the content that we host on AWS. It’s like two different people having two different apartments in the same apartment building.

Technically, it’s almost impossible for Amazon (or other big tech companies) to just seize every Ethereum node. They are a business, first and foremost, and they are tightly regulated. The chance for them to forcefully take over everybody’s node is slim-to-none. In other words, Ethereum nodes being hosted in AWS and other cloud platforms doesn’t mean they are not decentralized. As long as these nodes are owned by different entities, they are decentralized enough.

The Upcoming PoS Upgrade

Now here comes another important question. What’s going to happen with the upcoming Ethereum 2.0 upgrade where Ethereum will slowly migrate from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus? Many crypto maximalists, especially the more conservative ones, often accuse that PoS is doomed to fail when it comes to decentralization.

They claim that you are limiting everybody’s access to your blockchain network when you have to stake a certain amount of cryptocurrencies. However, many PoS enthusiasts believe it’s actually the other way around. You don’t need to invest in expensive computers just to be able to mine a decent amount of cryptocurrencies. By having a proof-of-stake system, Ethereum would be able to give fairer access to everybody. Whether this theory will be proven true or not, it still remains to be seen.

Ethereum itself would require 32 ETH for anyone who wants to become a validator. Some people think this is too high but some others believe it’s the perfect barrier entry.

Decentralization Debates Are Always Tricky

Unfortunately, debates and arguments about “decentralization” are always tricky. They are never as straightforward as everybody has different opinions and definitions of it. At the end of the day, a blockchain can be seen as sufficiently decentralized as long as it has plenty of different participants who don’t really know each other. It will be very hard to achieve full decentralization that can give access to everybody with minimum cost – if not impossible. Ethereum, at its current state, is already decentralized enough, and still more decentralized than most altcoins out there.