Geth Market Share Sees Drop After Concerns Over Black Swan Event

Ethereum Execution Client Geth has seen a 5% drop in its share after community members raised concerns over the network’s diversity and fears that its concentration could lead to a “black swan event.”

One Ethereum diversity advocate claimed that Geth’s concentrated use poses a risk because Ethereum validators could lose their staked ETH if it has a critical bug.

Geth Reports Market Share Drop 

Geth’s market share of the Ethereum network execution clients reported a drop of 5.2% on the 23rd of January. The market share dropped to 78.8% from 84% the previous day. Geth plays a crucial role in handling Ethereum transactions and executing smart contracts on Ethereum. However, its clear preference over others by Ethereum validators has led to a significant imbalance in execution client diversity on Ethereum, leading to several concerns around centralization. 

Several proponents of decentralization, including the founding member of the ETHStaker community, Superphiz, stated in a post on X that if Geth fell victim to a bug, it could lead to over 80% of the ETH staked on the network being wiped out. 

“Just in case you’re new here, let me say this loudly for you: “A geth bug could lead to >80% loss of staked eth. “I’m not trying to convince you that every execution client is as robust or as mature as Geth. I’m just telling you that it’s a good idea to use less robust clients to prevent a black swan event.”

The founder and CEO of Labrys, an Ethereum infrastructure firm, Lachlan Sweeny, suggested that Ethereum validators could lose everything in such an event. 

“Staked ETH is not risk-free yield. Would you invest a minimum of $75,000 USD into an instrument where the maximum potential gain is 3.5% p.a. but the potential for loss is 100%? Probably not, but this is what 84% of the Ethereum stakers are doing today.”

Bug Could Decimate Chain 

Geth’s share currently exceeds 66% or 2/3rds of the market share of the Ethereum network execution clients. According to Feeney, a bug could instantly stop the chain from finalizing. In such a scenario, Geth validators that go offline would be subject to an “inactivity leak” that could burn their staked ETH until the execution recalibrates to a 33.3% share of the network. This, according to Feeney, means that 90% of validators would be wiped out within 40 days. 

“Comparatively, a validator taken offline due to a minority client bug that does not stop the chain from finalizing would lose just 0.4% of its stake in 40 days.”

However, Sweeny added that validators would have a small window to exit and limit their losses because of a rate-limited queue for how many validators can exit per epoch. 

Coinbase To Diversify Execution Clients 

Amidst these concerns, leading cryptocurrency exchange Coinbase has announced plans to diversify its execution clients. The exchange is actively looking to integrate additional Ethereum execution clients into its system to address concerns related to Geth’s dominance. In a statement published on X on the 23rd of January, Coinbase Cloud stated it is actively looking at alternative qualified execution clients for its platform. The statement also acknowledged the growth made in the industry. 

“Alternative execution clients have come a long way, and so we are conducting an updated technical assessment with the goal of adding another execution client to our infrastructure.”

Coinbase added it had evaluated several execution clients since 2020, but none met Coinbase Cloud’s requirements. 

“Although we’ve evaluated execution clients since 2020, none have met Coinbase Cloud’s requirements to date. Many other operators on the network have reached the same conclusion, which is part of the reason why 84% of Ethereum validators run Geth. However, the tide is turning.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.