With The Merge, you may wonder if Ethereum 2.0 will get more decentralized. Unfortunately, the proof-of-stake consensus does not bring to Ethereum more decentralization, and we can even say it is the contrary. In the table below published by Trail of Bits (click on the link for the full report), you can see that the Nakamoto coefficient (number of validators required to collude against the blockchain) for Ethereum 2.0 is lower than for Avalanche and Solana:
Although this coefficient has varied for these blockchains since this table was published in August 2021, it shows that Ethereum 2.0 is less decentralized than the much criticized Solana (SOL). On top of that, the minimum staking requirement (32 ETH) forces small holders to stake through staking pools like Lido, Binance or Coinbase, allowing a few entities to take control of the blockchain...
Surprisingly, Avalanche (AVAX) is the most decentralized blockchain of the list (but still far away from Bitcoin which is not shown there) despite the FUD due to Cryptoleaks revelations which are more about the founder of Avalanche and his practices than about the quality of the blockchain itself.
The least decentralized blockchain of the list is Polygon, whose Nakamoto coefficient has increased from 2 to 3 since this table was published, which is the same level as Fantom, where almost nobody dares to go anymore. Therefore, we can wonder why Polygon benefits from a great popularity among VCs and retail users... Probably because they are linked to Ethereum while offering low gas fee transactions, and also because they are quite active.
There is no financial advice there. However, it might be worthwhile to be cautious with all the blockchains having a Nakamoto coefficient lower than Terra, which has almost died since this table was published, although there might be some exceptions to this general rule. Please DYOR as usual...
Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.
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