The Protocol: Ethereum Struggles With Sprawl as Optimism Airdrops $27M

Network news

Chart from Galaxy Research shows how the projected growth of Ethereum validators would slow based on the EIP-7514 proposal.

CROWD CONTROL: 

Ethereum has been so successful in attracting new validators for its proof-of-stake blockchain that the network is now starting to suffer from sprawl. There are nearly 800,000 active validators on the network, up about 41% since April’s “Shapella” upgrade, when withdrawals of staked ETH were first allowed, according to a Sept. 14 report by Galaxy Research’s Christine Kim. Based on certain assumptions, the number is on track to hit 1 million by mid-November and 2 million by June 2024. “Ethereum is getting close to reaching an unsustainable number of active validators,” Kim wrote. It’s pretty technical, but network “latency” is becoming a key problem, according to the report: There’s been “an increasing frequency of block reorgs and missed blocks in the first two slots of an epoch, likely due to increasing latency in attestation aggregation.” Developers have formalized EIP-7514 – an improvement proposal that would help, at least in the short term, by limiting entries of new validators to 8 per epoch (roughly 12 seconds), down from the current rate of 12. Another major concern from the rapid proliferation of validators, according to the Ethereum Foundation’s Dankrad Feist in a recent post, is that staking is becoming too concentrated in the hands of Lido, the biggest protocol for so-called liquid staking tokens. The plan to reduce the “churn limit” for new validators could be a stopgap measure for a more “elegant” fix down the road, Feist wrote.

OPTIMISM OPPORTUNISM:

Much of this year’s news on the layer-2 blockchain Optimism network, supported by the developer OP Labs, has revolved around the OP Stack – a set of software tools that can be used to spin up new layer-2’s that are essentially modified clones of Optimism. Among them is Coinbase’s Base blockchain, which has quickly climbed in the project rankings since its launch last month, partly thanks to the popularity of the Friend.tech social media platform. But in terms of providing an additional jolt of, well, optimism into the project, there’s often nothing like free money giveaways. And this week, the Optimism Foundation announced its third community airdrop, with more than 31,000 unique addresses receiving about 19 million OP tokens, worth $27 million. Even in the depths of crypto winter, some teams are still flush with pools of money (often in token form) that can be used to incentivize users to transact on these nascent networks. A further 570 million OP tokens have been allocated to future airdrops.

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