One Misconception and Severe Design Flaw of the Ethereum Merge

Source: Adobe / meteoritka

Sergey Vasylchuk is the co-founder and CEO of the staking provider Everstake.


The merger is near and there are some misconceptions about it that even the beautifully written FAQ on the dedicated page cannot answer. Understanding the new reality is key, especially as you prepare to bring it out.

That said, I often find people who ignore or misunderstand very important notions that are inseparable from union. Considering the immense importance of Ethereum (ETH) becoming a proof-of-stake (PoS) blockchain and the impact it will have on the crypto economy (which I’ve talked about elsewhere), I think many of us can’t afford to ignore those things.

So, I decided to talk about it point blank.

There are no 400,000 validators

As we get closer to merging in Ethereum, I hear a fairly repetitive narrative that it has around 400,000 validators after running the full PoS as there are allegedly so many owners of at least ETH 32 (USD 49,500), which is the minimum stake size. . But this is clearly wrong. Also, anyone would be able to run a node without ETH.

As the CEO of a company making its bread by validating on more than 50 different blockchains, I can see thousands of people launching nodes, but I can’t see them all guaranteeing nearly 100% uptime. Soon many of them will burn their fingers by cutting, lose their money, and eventually become completely unmotivated or financially unable to start over.

It means that the PoS incarnation of Ethereum will not have all the validators that some have come to expect. Also, I don’t expect the number of nodes to be significant enough to satisfy those with a serious decentralization problem. But, of course, there will be more node operators than proof-of-work (PoW) could ever afford.

These efforts risk being eclipsed by a very disturbing presence: the main centralized exchanges as validators.

Exchanges as validators are a flaw

Even now, Binance, CoinbaseAnd Kraken hold over 32% of ETH in staking. With the transition of Ethereum to PoS, the risk from trading will only increase.

The fact that exchanges can participate in validation is a personal pain. It’s a major design flaw that I don’t even know how to fix. Maybe some projects will find a solution one day, but right now it seems impossible.

PoS validators are reliable because acting against the interest of the network will cost them a lot of money and they are aware of it. It incentivizes them to work diligently and, for example, to maintain 100% uptime.

But exchanges don’t use their own funds for betting. They simply push their users’ money there and make profits that sometimes they don’t even reveal. If they act against the interests of the network, they will lose nothing, unlike their customers, whose tokens may be deprecated due to reckless actions of an exchange.

The exchanges are large enough to damage an entire ecosystem and get away with it. And knowing the influence and reach of Ethereum, it will become a big deal when the merge occurs.


The most important notion, however, is not surprising: we are all people and we drag our human imperfections even into perfect technologies. As long as some people are vying for power for the sake of power and others chasing fast money without thinking about the importance of technological advancement, there will always be politics, even in cryptocurrencies.

And I’m afraid the union will allow more such people to enter the realm where they can impact the ecosystem. It is not a reason to fear the union itself, of course. Its importance for technology and the very evolution of cryptocurrencies is difficult to underestimate.

What I mean, after all, is that we must all be ready to face this new reality when it finally arrives.
Find out more:
– Vitalik Buterin says his influence on Ethereum decreases as the network approaches merger
– Analysts advise Ethereum users to avoid trading on the day of the merger, outlining numerous risks

– No “black and white” answer to the Proof-of-Work vs. Proof-of-Stake, says Kraken
– The long-term impact of the merger on Ethereum

– Major bitcoin and cryptocurrency companies warn of “extreme” risk in Proof-of-Stake systems
– The trade-offs and benefits of moving from Ethereum to a Proof-of-Stake network

Leave a Comment