What Is ‘Miner Centralization’ in PoW and How Does It Compare to ‘Validator Centralization’ in PoS?
Miner centralization in PoW is the concentration of hash power among a few large mining pools or hardware manufacturers, making the network vulnerable to collusion or a 51% attack. Validator centralization in PoS is the concentration of staked capital among a few large entities (e.g. centralized exchanges or LSD protocols).
Both forms of centralization compromise the network's decentralization and censorship resistance, but PoS centralization also carries the risk of a single point of failure and regulatory capture.
Glossar
Mining Pools
Structure ⎊ These collaborative entities aggregate the hash power contributions of numerous individual miners to smooth out the probabilistic variance in block rewards.
Validator Centralization
Governance ⎊ Validator centralization represents a concentration of power within a blockchain network's consensus mechanism, specifically impacting the distribution of block production authority.
Centralized Exchanges
Exchange ⎊ Centralized exchanges (CEXs) represent a critical infrastructure within cryptocurrency markets, facilitating order matching and settlement for a diverse range of digital assets, including options and derivatives.
Centralization
Architecture ⎊ Centralization, within cryptocurrency, options trading, and financial derivatives, denotes a concentration of control and decision-making power, often manifested through centralized exchanges or custodians.
Single Point of Failure
Concentration ⎊ In crypto derivatives, this risk materializes when excessive collateral or governance control resides with a small number of entities, such as a few large liquidity providers or key developers.
Pos Centralization
Concentration ⎊ PoS Centralization refers to the undesirable trend in Proof-of-Stake blockchain networks where a disproportionately large amount of staked capital and, consequently, block production power becomes concentrated in the hands of a few large entities, such as staking pools or centralized exchanges.