Morgan Stanley Says Ethereum (ETH) Is Becoming More Centralized

Ethereum is becoming less decentralized as only four companies control 60% of the network’s validators.

In a recent research report, Morgan Stanley, American multinational investment management and financial services company, said Ethereum has become more centralized following the network’s transition to a Proof-of-Stake (PoS) algorithm.

According to the Morgan Stanley report, 65% of Ethereum’s nodes are cloud-hosted, while half of the network’s validators use Amazon Web Services (AWS).

Morgan Stanley Fears

Morgan Stanley noted that there could be a problem if some of these service providers choose to censor some cryptocurrency products or participants. Furthermore, Morgan Stanley noted that a bigger issue could emerge if there is a lengthy network outage.

Following Ethereum’s transition from a Proof-of-Work consensus to Proof-of-Stake, transactions on the network are approved by validators. Per the report, 60% of Ethereum’s current validators are controlled by only four companies.

Meanwhile, Martin Köppelmann, founder of Gnosis, raised concerns about Ethereum centralization problems last week. According to Köppelmann, 51% of Ethereum blocks complied with regulatory measures set by the Office Of Foreign Assets Control (OFAC). Köppelmann noted that the Ethereum chain could be censored if these validators decide not to attest to non-OFAC compliant blocks.

The Crypto Basic reported that France energy giant EDF was running over 150 Ethereum nodes. Recall that soon after merge, data from Santiment showed that only two addresses ran over 45% of the Ethereum nodes; it was believed that those two addresses belonged to Ethereum Foundation and JPMorgan.

It is noteworthy that the Ethereum team is aware of the network’s centralization issue and is currently working on possible solutions to address these concerns.