At the ETHTaipei 2024 event in Taiwan, Ethereum co-founder Vitalik Buterin shared insights into Ethereum’s ongoing challenges and proposed a novel solution called “rainbow staking” to tackle centralization risks within the network. As Wu Blockchain pointed out in an X post, Buterin addressed concerns about too much control by staking services like Lido, Coinbase, and Binance.
Buterin highlighted a pressing concern regarding Ethereum’s proof-of-stake mechanism emphasizing the potential centralization stemming from widespread staking activities. Buterin pointed out the prevalence of “lazy stakers,” individuals possessing the minimum 32 ETH required to operate a validator but opting for staking pools or liquid staking tools instead of solo staking. He suggested that promoting “solo staking” could mitigate such centralization risks.
Despite acknowledging the ease of solo staking, Buterin expressed concerns about its adoption rate highlighting the reliance on social pressure and virtue rather than economic incentives to maintain network security. The dominance of protocols like Lido controlling 30% of staked Ether underscores the need for a comprehensive solution to ensure Ethereum’s decentralization.
In response to these challenges, Buterin introduced the concept of rainbow staking which is framework aimed at democratizing participation in Ethereum’s protocol services. Rainbow staking seeks to engage protocol service providers ranging from amateur to professional by offering a diverse menu of protocol services tailored to their strengths and value propositions.
Rainbow staking is a strategy that involves categorizing services into two segments, heavy and light. Heavy services are slashable and require constant participation whereas light services offer non-slashable participation similar to a lottery-based system. The aim of rainbow staking is to provide differentiated classes of service providers to maximize effectiveness and boost the economic value of solo stakers.
The new proposal of Rainbow Staking led by researcher Barnabé Monnot separates the role of staking one’s ETH known as a delegator from the role of running the validator software known as an operator. The idea is to enable delegators to earn rewards without the technical burden of running the validator software.
Rainbow Staking offers a unique solution that introduces two types of operators namely Solo and Professional. Solo stakers could run their own validators while professional operators could manage validators for multiple delegators. This approach creates more opportunities for participants and aims to prevent a small number of entities from controlling the network thereby increasing decentralization.
