Experts warn of vulnerabilities about Ethereum blockchain security, raising concerns about the safety of billions of dollars in cryptocurrency and the integrity of decentralized applications built on the platform.
A recent poll by Galaxy Digital researcher Christine Kim, on the social network “X” – former Twitter, reveals significant misconceptions within the Ethereum community about how much staked Ethereum (ETH) is necessary to secure the network.
Vulnerabilities of Ethereum: Less Staked ETH Needed for Attack Than Many Believe
Respondents displayed the following beliefs about Ethereum’s security:
- 44.9% believed that securing Ethereum requires 100% of all ETH staked, amounting to $110 billion, 31.4 million ETH.
- 20.4% thought 66.6% of staked ETH was sufficient, equivalent to $73.4 billion, 20.9 million ETH.
- 34.7% felt that only 33.3% of staked ETH, or $36.7 billion, 10.4 million ETH, was required for security.
Addressing these misconceptions, Christine Kim emphasized the actual vulnerabilities of Ethereum’s Proof-of-Stake (PoS) mechanism in a detailed follow-up. She highlighted that an attacker can disrupt finality with 33% of the total stake, prolong a chain split with 50%, and double spend with 66% of the total stake.
Kim added that security primarily depends on the network’s ability to penalize stakers by burning large amounts of the locked value. The worse the attack, the more value stakers stand to lose.
It is crucial to comprehend the true significance of the situation, with a pun intended. Further elaboration from the Ethereum Foundation explains the technical underpinnings of these vulnerabilities.
An article by the foundation states that attackers using >= 33% of the total stake make all attacks mentioned more likely to succeed.
If the amount exceeds this limit, it would be a more precise and concise way of getting the same meaning so they can prevent the chain from finalizing without having to control the actions of the other validators.
For attacks involving 34% of the total stake, the article detailed a possible scenario of “double finality” where an attacker can manipulate the validation of two conflicting blockchain forks at the same time. This kind of attack is characterized by significant coordination and control over the timing of messages within the network, posing a high risk due to the potential slashing of the attacker’s entire staked amount.
Higher levels of controlled staking, such as 50% and 66%, increase the potential for more severe disruptions, including sustained chain splits and transaction censorship or reversal.
The foundation’s article elaborates that at >50% of the total stake, the attacker could dominate the fork choice algorithm, enabling them to censor certain transactions, do short-range reorgs, and extract maximum MEV by reordering blocks in their favor.
Ethereum Blockchain Security: The Power of Community Consensus
To protect the Ethereum network from security risks, it has an “inactivity leak” mechanism that gradually reduces the stake of inactive or malicious validators. Additionally, if the chain splits, the Ethereum community uses social consensus to decide which chain to follow.
These revelations underscore the importance of community awareness and technical safeguards in maintaining the security and integrity of the Ethereum network. While Ethereum’s PoS system offers several security advantages, it also requires vigilant monitoring and readiness to act against potential attacks.
As the Ethereum staking landscape evolves, several key trends have emerged, reshaping how stakeholders interact and benefit from the staking process.
The Rise of Re-staking and the Challengers to Lido’s Dominance
Tom Wan, researcher at 21.co, highlighted these trends in a recent post:
- Increase in Re-staking Popularity: Since 2024, there has been a significant shift towards re-staking in the Ethereum ecosystem.
- Re-staking contributions have grown from 10% to 60% of the total staked ETH. Eigenlayer, in particular, has risen to prominence as the second-largest DeFi protocol on Ethereum, holding a $15 billion Total Value Locked (TVL), which represents 13% of all staked ETH.
- The decline in Lido’s Market Share: The rise of liquid restaking protocols has noticeably impacted Lido’s dominance in the Ethereum staking market. Lido’s share has fallen below 30%, influenced by the growth of new platforms like Etherfi, which has become the second-largest withdrawer of stETH since 2024, totaling withdrawals of 108k stETH.
- Centralized Exchange (CEX) Staking Decline: The prevalence of centralized exchanges in ETH staking has decreased from 29.7% to 25.8% since 2024. Kiln Finance recently surpassed Binance to become the third-largest ETH staking entity. Ether.fi is gaining market share and is positioned to challenge Binance’s former dominance shortly.
In conclusion, the Ethereum community must be aware of the actual vulnerabilities of the blockchain’s security and take necessary measures to protect the network.
The trend towards re-staking, decline in Lido’s market share, and centralized exchange staking decline are significant developments that will shape the future of Ethereum’s staking landscape.
