After the completion of The Merge upgrade, Ethereum (ETH) has transitioned into a proof-of-stake (PoS) consensus mechanism, making the blockchain energy efficient and secure. However, mining data shows that Ethereum relies heavily on Flashbots – a single server – for building blocks, raising concerns about a single point of failure for the ecosystem.
Flashbots is a centralized entity dedicated to transparent and efficient Maximal Extractable Value (MEV) extraction, acting as a relay for delivering Ethereum blocks. Data from mevboost.org shows that there are currently six active relays supplying at least one block in Ethereum, namely Flashbots, BloXroute Max Profit, BloXroute Ethical, BloXroute Regulated, Blocknative and Eden.
As shown above, 82.77% of all relay blocks were found to be built only by Flashbots – which is a big contributor to the centralization of Ethereum.
A related blog from BitMEX highlighted the need for a complete redevelopment of Flashbots or a similar system to mitigate unforeseen complications in a post-merger era. However, Flashbots proponents argue that the system is a decentralized autonomous organization (DAO) and will eventually become decentralized itself.
Related: Ethereum Merge: Community Responds With Memes, GIFs & Tributes
Complementing the data regarding the dominance of Flashbots, an analysis of Santiment indicated that 46.15% of Ethereum’s PoS nodes are controlled by just two addresses.
According to our #Ethereum Dashboard for inflation after merging, 46.15% of the #proofofstake nodes for storing data, processing transactions and adding new ones #blockchain blocks can be attributed to only two addresses. This heavy dominance of these addresses is something to watch. pic.twitter.com/KQdFNgGloD
— Santiment (@santimentfeed) September 15, 2022
“Since the successful completion of the merger, the majority of blocks – somewhere around 40% or more – have been built by two Lido and Coinbase addresses. It’s not ideal to see more than 40% of blocks being handled by two providers, especially one that is a centralized service provider (Coinbase),” explains Ryan Rasmussen, crypto research analyst at Bitwise.