Ethereum vs. Solana: Validator Centralization and MEV
Ethereum's validator centralization and staking dominance
Ethereum's proof-of-stake network has seen staking rights highly concentrated in a few large entities. As of 2023, most staked ETH is controlled by centralized pools or exchanges. For example, Lido Finance alone accounts for about 30-32% of all staked ETH. Combined with other top providers like Coinbase, Kraken, and Binance, over 50% of Ethereum's stake is held by four entities. This trend immediately raised early concerns after The Merge - by the end of 2022, over 60% of staked ETH was held by Lido, Coinbase, Kraken, and Binance. Overall, analyses indicate that a small number of participants wield excessive influence: about 25 entities collectively manage ~84% of all staked ETH. This centralization means that a few operators could influence or censor a large portion of validators, posing systemic risks to network decentralization and consensus. Although Ethereum has hundreds of thousands of validator slots, many are run on behalf of users by these large proof-of-stake services, thus centralizing control.
• Dominance of large staking pools: Lido's staking pool has become the largest single 'validator' on Ethereum (by stake), with about one-third of the network's ETH delegated to it. Lido itself distributes this stake among a group of node operators, but its DAO governance and token control are centralized (the top 100 holders of Lido governance tokens control over 93% of its supply). This has led Ethereum researchers to warn that 'Lido's dominance over 1/3 is a centralization attack on PoS.' Other exchanges like Coinbase also hold double-digit percentages of stake. The heavy reliance on a few platforms means that Ethereum's validator set is actually far less decentralized than the original number of validators would suggest.
• Barriers to entry reinforce centralization: To operate an individual validator on Ethereum, one must stake at least 32 ETH (worth tens of thousands of dollars) and maintain reliable hardware and uptime. This high capital requirement has been a significant barrier to broader participation. Small holders who cannot meet the 32 ETH threshold are guided to use pool services or exchanges, further increasing the holdings of large intermediaries. Even Ethereum co-founder Vitalik Buterin has acknowledged this issue and advocated for lowering the minimum staking limit (potentially down to 16 ETH or even 1 ETH in the long term) to 'democratize' individual staking and promote decentralization. Until such changes occur, the demand to stake 32 ETH (or join a mining pool) will effectively concentrate power in the hands of mining pool operators and hinder truly independent validators.
MEV extraction on Ethereum and its impact
Ethereum's validators (and block producers) also gain influence and profit through Maximum Extractable Value (MEV) - they extract additional value by reordering or inserting transactions in blocks. MEV has become an important aspect of Ethereum's economy, with over $600 million extracted on Ethereum by 2023. Since the transition to PoS, MEV opportunities have only increased: an estimated 180,000 ETH of MEV was extracted in the first approximately 8 months post-merge.
• Scale of MEV: Cumulatively, about 620,000 ETH have been converted to MEV on Ethereum (including the PoW era up to mid-2023 and the post-merge period). This means that those controlling the blocks containing transactions have siphoned off substantial value from ordinary users. Flashbots and other MEV relay systems have formalized this process, allowing validators to auction block space for MEV. Validators can now earn substantial income from MEV in addition to block rewards, incentivizing them to participate in these extraction behaviors. In fact, MEV has become so profitable that it accounts for a significant portion of Ethereum's staking rewards - one analysis showed that the priority fees for the top 5 validators amount to about $105,000, while the overall priority fees for all validators amount to $39,000, indicating that large validators capture an outsized share.
• User impact ('toxic' MEV): The impact on Ethereum users is primarily negative. MEV extraction often manifests as front-running or 'sandwich' attacks on user transactions, where bots (or validators themselves) insert their transactions before and after user transactions for profit at the expense of users. This results in users getting worse prices or higher slippage in DEX trades, essentially functioning as an invisible tax. Studies show that MEV causes significant financial losses for users, network congestion, and higher gas prices for everyone. When many MEV bots compete, they raise gas fees to outbid each other, making ordinary users' transactions more expensive. These practices are often termed 'toxic MEV' because they directly extract value from users and degrade user experience. In short, Ethereum's MEV introduces efficiency and fairness issues: while it increases validator profits, it harms user interests through higher costs and more unpredictable transaction outcomes.
• Centralizing effects of MEV: MEV tends to reinforce the influence of large validators. Larger validators or mining pools have more frequent opportunities to propose blocks, giving them more chances to capture MEV. This leads to higher and more stable returns compared to smaller individual stakers. In fact, participating in MEV optimization (such as running specialized relay software or private order flows) has become almost a necessity to remain competitive as a validator. This dynamic may increase centralization risks - those with resources to optimize MEV will gain an advantage, potentially squeezing out smaller operators or forcing them to join complex mining pool arrangements. Additionally, there are concerns that if a few MEV relay operators or builders dominate (as Flashbots delivered the majority of blocks post-merge), it could introduce de facto centralization in block production, even if the number of validators is large. The Ethereum community is actively exploring solutions (e.g., proposer-builder separation and MEV burn mechanisms) to mitigate these issues, but for now, MEV extraction amplifies the power disparity between large and small validators and could undermine user trust.
Ethereum's validator set: scalability and decentralization challenges
Today, Ethereum has hundreds of thousands of active validators (expected to exceed 600,000 by the end of 2023), indicating a broad network distribution. However, in practice, effective decentralization is limited by the factors mentioned above. The dominance of a few proof-of-stake providers means that Ethereum's Nakamoto coefficient (the minimum number of entities needed to collude to disrupt the chain) is very low - estimated to be as low as 1-2 if entities like Lido are considered. (Lido alone nearly exceeds the 33% threshold needed to stop the chain, and Lido + one exchange easily surpasses one-third.) Even with a stricter 50% stake threshold, analyses still find that Ethereum's Nakamoto coefficient in practice is only about 2-3. This is far lower than Solana or other networks (which are in double digits), illustrating how a few participants on Ethereum can exert excessive influence over consensus.
Ethereum's validator design also involves considerations of scalability. The network intentionally limits the rate at which new validators can join or exit (attrition rate) to maintain stability. During times of high demand for staking or unstaking (such as after the Shanghai upgrade enabling withdrawals), queues can form as only a certain number of validators can be processed per epoch. While this is a protocol safeguard, it means Ethereum cannot immediately decentralize or redistribute staking, even with a large influx of new independent validators; growth is constrained for stability. Additionally, running a validator requires maintaining two software clients (execution client and consensus client) and handling responsibilities such as proposing blocks and attestations.
Despite Ethereum's design (random sampling of committees and BLS signature aggregation) having handled up to about 1 million validators so far, coordinating a very large validator set brings network overhead and complexity in voting aggregation. Nevertheless, some speculate that if Ethereum's validator set becomes very large without further protocol optimization, it may face challenges in communication overhead or state bloat.
In summary, Ethereum's current validator model sacrifices some decentralization for security and simplicity. High capital requirements and technical complexity attract participation to mining pools, leading to excessive influence from a few operators. These conditions do not necessarily limit the throughput of the base layer (by design, Ethereum's TPS remains around 10-30), but they do increase governance and consensus risks. Community initiatives aimed at improving decentralization, such as reducing staking requirements, encouraging distributed validator technology (DVT), and limiting the share of any single provider, are all responses intended to address this. Until these measures take effect, Ethereum's consensus can be said to be easily influenced by a few large validators, even though the network is theoretically permissionless, allowing anyone to join with 32 ETH.
The validator structure and decentralization of Solana
Solana takes a different approach with its high-performance proof-of-stake network. It has fewer validators than Ethereum, but each validator holds a relatively small weight in the overall stake distribution. By the end of 2024, Solana has around 1,400 active mainnet validators (consensus nodes) supported by around 5,000 nodes across 46 countries/regions (including RPC nodes). This number is an order of magnitude lower than Ethereum's number of validators, but Solana's degree of staking decentralization (distribution of stake among validators) is relatively high:
• Staking distribution: No single validator on Solana holds more than 3% of the total stake. In fact, the largest validator's stake is about 3.2% of all SOL, while the top 30 validators collectively make up the critical threshold for consensus (33%). The Nakamoto coefficient of Solana consensus (the minimum number of validators needed to collude to stop the network) is around 18-31, depending on the measurement method. In other words, dozens of independent validators need to act maliciously together to disrupt Solana's chain, while only a few entities can do so on Ethereum. This indicates that Solana's validator concentration of stake and power distribution is more decentralized. Solana's stake is also actively delegated by thousands of individual token holders to many different validators, preventing a single staking pool from dominating the network. Even the major institutional validators on Solana (e.g., exchanges or large staking services) cannot approach the network share of Lido or Coinbase on Ethereum - for instance, no Solana validator (even those operated by large companies) has a stake exceeding about 3%, while the top 19 validators hold about one-third of the stake (NC=19).
• Validator requirements and participation: Unlike Ethereum's fixed 32 ETH requirement, Solana does not require a minimum SOL stake to run a validator - technically, anyone can start a validator node. The real barrier for Solana is infrastructure. Running a Solana validator requires powerful hardware and fast network connectivity. Solana prioritizes high throughput and low latency, meaning validators typically need high-end CPUs, large amounts of RAM (128GB+), and enterprise-level bandwidth to keep up with the chain's fast block production. This entails higher costs: in contrast, operating a Solana node may cost about 5 times more than running an Ethereum node. This has sparked criticism that while Solana's network is decentralized in terms of staking, it is somewhat exclusive regarding who can actually run validators (usually professional validators or data centers).
In fact, Solana's validators tend to cluster in data centers; about 68% of the stake is held by validators located in Europe (main hubs in Germany and the Netherlands), indicating a certain degree of centralization in geography/infrastructure. The Solana Foundation and the community are attempting to mitigate this by encouraging more geographically distributed nodes and supporting smaller validators through incentive programs. Importantly, token holders on Solana can easily delegate their SOL to any validator without a lock-up period (except for activation periods) and can switch if a validator underperforms. This delegated stake model aligns with decentralization incentives: validators compete on performance and fees to attract delegators, and new validators can onboard if they prove reliable, even starting with low stakes.
• Consensus design: Solana's consensus combines proof-of-stake with a unique Proof of History (PoH) mechanism to order blocks. The network employs a leader scheduling system - validators take turns serving as leaders (block producers) for a short period (a 'time slot' of only 400 milliseconds). This rapid rotation means leadership (and the power to decide transaction ordering) quickly shifts among many validators, rather than being long-term dominated by a few large miners or validators. In each time slot, the selected leader validator can organize transactions (including any MEV opportunities), and others then vote on the proposed block. As leaders change with each time slot in a stake-weighted cycle, no single validator can continuously control block ordering outside of their designated turn. The fast scheduling and high throughput (Solana typically processes hundreds or thousands of transactions per second, peaking at around 65k TPS) sharply contrast with Ethereum's approximately 12-second block time and around 30 TPS. Thus, Solana's design emphasizes performance and throughput at the cost of higher complexity.
Solana's incentives, MEV, and notable trade-offs
Solana's incentive structure for validators is also unique. Validators earn rewards from inflation (new SOL issuance) and a portion of transaction fees, similar to Ethereum, but each transaction fee on Solana is extremely low. This means that the network relies more on inflation rewards (and optional MEV) to compensate validators.
• MEV on Solana: Maximum Extractable Value also exists on Solana, particularly in the form of arbitrage between numerous Serum-based DEX markets and during NFT minting periods (which attract bot activity). However, historically, Solana's high throughput and cheaper transactions have led to different MEV dynamics. MEV seekers on Solana do not raise fees as they do on Ethereum; instead, they sometimes send a large volume of transactions to the network to compete for arbitrage, which has caused congestion in the past. The ecosystem has responded by developing MEV-aware infrastructure: for instance, Jito Labs has launched a Solana client optimized for MEV, allowing validators to capture MEV more elegantly (bundling profitable transactions and sharing revenue) rather than letting bots spam and disrupt the network. As of the end of 2023, over 30% of Solana validators run the Jito client to leverage these MEV optimizations. So far, MEV's impact on Solana users has not been as direct as it is on Ethereum - Solana typically does not cause users to lose significant funds due to sandwich attacks because its order book design and lack of public mempool (Solana transactions are forwarded to the leader) make front-running less straightforward. That said, bots have previously tried to extract profits from NFT mints, leading to network issues (such as traffic spikes causing disruptions), which are indirect negative consequences of MEV-like behavior. Solana's community approach is to integrate MEV into the protocol through clients like Jito, aiming to monetize it for validators without compromising network stability.
This remains an evolving area, but overall, MEV has a smaller impact on Solana validators' revenue compared to Ethereum, and users' experiences on Solana are less affected by hidden MEV taxes.
• Performance vs. decentralization: Solana's main advantage lies in its high performance and scalability - it can handle much larger on-chain throughput than Ethereum, making it very suitable for high-frequency trading, gaming, and other demanding applications. It achieved 138 million transactions in one day under peak load, far exceeding Ethereum's capacity. This is realized through validator design (powerful nodes, PoH, etc.), but it comes at the cost of complexity and occasional instability. Network outages have been a known issue for Solana. Notably, Solana has experienced periodic outages, requiring a restart after the network stops - for example, one outage in September 2021 lasted about 17 hours, along with several shorter events in 2022. Even in 2024, an incident in February caused about 5 hours of downtime. These outages are typically related to bugs or excessive load, and although core developers have improved the codebase (the network ran 100% normally for nearly a year before the February 2024 incident), the outage history sharply contrasts with Ethereum's more consistent uptime. Ethereum's more conservative design (lower TPS, simpler execution per node) means it rarely, if ever, encounters complete outages, while Solana pushes limits and occasionally fails. Therefore, Ethereum prioritizes decentralization and stability, while Solana prioritizes speed and throughput, accepting more complexity.
• Validator client diversity: Ethereum currently offers multiple independent client implementations (Prysm, Lighthouse, Teku, etc.) for its validators, which is crucial for resilience. Historically, Solana has had only one major client (Solana Labs'), but it has recently made progress in a multi-client ecosystem. Projects like Jump Crypto's 'Firedancer' (C++ Solana client) are in development and have proven capable of further increasing throughput (testing over 1 million TPS). As of October 2023, there are four different validator clients being developed for Solana (Solana Labs, Jito, Firedancer, and a new client in Zig), with Jito already in widespread use. This evolution will reduce single-client risk and narrow the gap in software decentralization with Ethereum. This is a significant distinction, as a bug in a single client should not lead to the collapse of the entire network. Ethereum learned this lesson in 2021 when a bug in a popular client caused a chain split (but the network continued to operate due to other clients still running). Solana's shift towards multiple clients will similarly strengthen its decentralization on the software level.
• Governance and control: In Ethereum, large validators and staking providers can indirectly influence governance (e.g., signaling support for upgrades or leveraging their stake to gain significant voting power in future on-chain votes). However, Ethereum's core upgrades are decided through community consensus and social governance off-chain, rather than through token-weighted voting. On the other hand, Solana has on-chain governance for certain parameters and is more foundation-driven. The Solana Foundation and core contributors play a significant role in driving updates (e.g., changes to the fee market or upgrades to fix disruptions), and large SOL holders can influence governance proposals. However, as no single validator controls a large share, no validator or exchange on Solana can unilaterally decide governance outcomes - it requires agreement from many to achieve a majority. Both networks have some degree of centralization in governance (Ethereum through influential core developers and staking pools; Solana through its foundation and investor token holdings), but at the pure validator level, Solana's control is more decentralized among its validators, while Ethereum's control is more centralized.
Comparing the influence of Ethereum and Solana validators
To clearly contrast the influence of Ethereum validators with...
The structure of Solana, here are its main differences:
• Staking concentration: Ethereum - A few entities dominate (e.g., 4 providers control about 54% of staked ETH, one pool controls about 30%), giving them significant influence. Solana - Staking is more decentralized; no validator holds more than about 3% of the stake, and it takes approximately 20 of the largest validators to reach one-third of the stake. This means Ethereum is more vulnerable to collusion among a few validators, while Solana requires larger collusion to threaten the network.
• Maximum Extractable Value (MEV): Ethereum - MEV extraction is a major aspect, with validators siphoning off hundreds of millions of dollars, often at the expense of users (through front-running and increased fees). This not only harms user interests but also disproportionately rewards larger validators, reinforcing their position. Solana - MEV exists but poses less harm; the network's design and throughput mean that the extractable value per block is less, and the fee market is no longer winner-takes-all. Emerging MEV solutions on Solana (like Jito) aim to capture value without harming users with high fees or visible front-running, and thus far, MEV has not significantly degraded user experience on Solana. Validators on Solana do benefit from MEV (e.g., through Jito auctions), but its impact is smaller and more decentralized compared to the MEV-driven economics of Ethereum.
• Validator entry and infrastructure: Ethereum - Low hardware requirements (consumer-grade computers can run nodes), but becoming a validator requires high capital (32 ETH). This financial barrier pushes many into staking pools, creating centralization pressure. Solana - No fixed minimum staking requirement, but to be an efficient validator, high demands for hardware and bandwidth are necessary. This means anyone with technical expertise can attempt to participate, but in practice, most data center-level operators succeed. This leads to a reduction in the total number of validators, but each validator is more independent (in terms of staking), as delegators can choose from a wide range of operators. Essentially, Ethereum makes running a validator node easy but costly, while Solana makes staking (relatively) affordable but running nodes challenging. Each model has a centralizing force: Ethereum's financial barrier vs. Solana's hardware barrier.
• Network throughput and stability: Ethereum - prioritizes security and decentralization; throughput is intentionally limited, and the network is very stable (with no significant outages). Solana - prioritizes scalability; it achieves very high throughput and low latency but has experienced outages and resets in the early stages. From a validator's perspective, this ideological difference means Ethereum's validators handle less load per node (allowing many hobbyists to participate), while Solana's validators handle large loads (requiring professional setups). The result is that Ethereum's validator influence comes from economic weight (stake), while Solana's influence comes more from technical capability, but distributed stakes ensure no single technical operator dominates in stake weight.
In summary, Ethereum's validator landscape is characterized by the excessive influence of a few large staking entities and MEV-driven rewards, which could undermine fairness for users, raising concerns about decentralization despite the nominally large number of validators. Solana's validator structure is quite different - it has fewer but more evenly weighted validators, high performance requirements, and higher collusion thresholds, reflecting a performance-oriented design while attempting to maintain decentralization through staking distribution. Each approach has its trade-offs, but it is clear that Ethereum currently faces centralization risks from validator dominance and MEV, while Solana distributes influence more evenly among validators at the cost of higher hardware centralization.