Valid Points: Ethereum 2.0 Trends Toward Decentralization

Also: Tomorrow, the first backward-incompatible upgrade for the Beacon Chain will activate on the Pyrmont test network.

AccessTimeIconAug 18, 2021 at 11:30 a.m. UTC
Updated Apr 25, 2023 at 7:26 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

Tomorrow, the first backward-incompatible upgrade for the Ethereum 2.0 Beacon Chain will be activated on the Pyrmont test network. The upgrade, dubbed “Altair,” will introduce a number of code changes, including increased penalties on validator misbehavior and improved functionality for lightweight versions of Eth 2.0 software. 

(More information about what to expect from Altair can be found in a previous issue of Valid Points.)

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum 2.0 and its sweeping impact on crypto markets. Subscribe to Valid Points here.

This week, in a guest post in New Frontiers, Alex Svanevik, the CEO of blockchain analytics firm Nansen, and Nansen’s Research team break down the data behind validator behavior and stake centralization on Eth 2.0 thus far. While Altair is expected to further improve network dynamics, the  authors highlight metrics suggesting that security and decentralization are already trending in a positive direction.  

Pulse check

The following is an overview of network activity on the Ethereum 2.0 Beacon Chain over the past week.

Network health as of Aug. 17
Network health as of Aug. 17
CoinDesk validator health as of Aug. 17
CoinDesk validator health as of Aug. 17

Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.

New frontiers: Toward a decentralized Ethereum 2.0

Nansen is a blockchain analytics platform tracking over 90 million labeled Ethereum wallets and accounts. The following guest post authored by Nansen CEO Alex Svanevik and his team is an excerpt from a recently published blog post breaking down the data behind Ethereum 2.0. 

While centralized exchanges such as Kraken and Binance continue to command a significant share of total Ethereum 2.0 stake, they appear to be losing share to decentralized staking alternatives such as Lido Finance and Rocket Pool. 

The share of Ethereum 2.0 staked on centralized exchanges is decreasing.
The share of Ethereum 2.0 staked on centralized exchanges is decreasing.

The top four staking entities (Lido, Kraken, Binance, on Eth 2.0 make up 36.6% of total ETH deposits. Lido is the second largest by total ETH deposited next to Kraken, managing over 750,000 ETH on Eth 2.0 from 9,000 unique Ethereum accounts. 

Measuring decentralization

The Herfindahl–Hirschman Index (HHI) is a metric in traditional economics that measures market concentration and competition. It has been applied to blockchains to measure relative network decentralization. Nansen calculates HHI for Eth 2.0 by squaring the share of each source account that has staked on the network, and summing the resulting numbers.

The Herfindahl–Hirschman Index applied to Eth 2.0 suggests stake centralization is decreasing.
The Herfindahl–Hirschman Index applied to Eth 2.0 suggests stake centralization is decreasing.

Though it is clearly not the case that all deposit accounts are independent, the trend does indicate a gradual decrease of HHI over time. Still, it’s important to remind ourselves that centralization risks exist on every layer of the blockchain technology stack. According to data from Ethernodes, more than 21% of Ethereum nodes run on Amazon Web Services.

Profiling deposit activity

Deposit activity on Eth 2.0 is curiously irregular and does not correlate with ETH prices. 

The number of daily deposits to Eth 2.0 began falling from May 5 onward, just as Ethereum was inching toward its high of $4,000. The number of deposits then rose significantly from mid-May to mid-June as the value of Ethereum almost halved. 

The number of daily deposits to Eth 2.0 hit a peak of 4,788 deposits starting Nov. 1, 2020.
The number of daily deposits to Eth 2.0 hit a peak of 4,788 deposits starting Nov. 1, 2020.

Ethereum 2.0 represents a marked change in the security and economic model of Ethereum, with multiple ramifications including the transformation of ETH as an inherently yield-generating asset.

Validated takes

  • Stani Kulechov, the founder of Aave, is working to create a decentralized alternative to Twitter. BACKGROUND: Top developers like Kulechov and co-founder of Ethereum Vitalik Buterin believe blockchain technology can be leveraged to create higher-quality social discourse.
  • Ether is the most popular cryptocurrency in Singapore, according to a survey published Monday. BACKGROUND: The survey of over 4,000 adults, conducted June 29–July 9, also found that 67% of respondents with personal investments have crypto in their portfolio, and two-thirds of the crypto holders increased their digital asset holdings during the coronavirus pandemic.
  • Aave Arc, the institutional arm of decentralized lending protocol Aave, will not offer tether (USDT) as an asset, even though it is the most utilized stablecoin on Aave. BACKGROUND: Regulatory concerns with the largest stablecoin by market capitalization have kept it from being listed on Aave’s institutional lending platform. Tether’s largest competitor, Circle, will have USDC listed as the stablecoin of choice in the new institutional lending pools.
  • In efforts to develop zero-knowledge (ZK) blockchain scaling technology, Polygon, a layer two network on Ethereum, is merging with the Hermez Network. BACKGROUND: Hermez will be absorbed into the Polygon ecosystem under the name Polygon Hermez. The entire Hermez project – its employees, technology and native HEZ token (which holders will be able to exchange at a rate of 3.5 MATIC:1 HEZ) – will be integrated into Polygon’s platform.
  • Ethereum data platform Dune Analytics raised $8 million in a Series A funding round led by Fred Wilson’s Union Square Ventures. BACKGROUND: Dune Analytics is best known for its do-it-yourself dashboarding functionality that allows anyone with a meager knowledge of blockchain metrics to easily piece together real-time data visualizations about on-chain activity and then share those creations with the world. The platform hosts at least 6,817 different user-built dashboards tracking everything from EIP 1559 burn rates to Uniswap trading pairs. 

Teddy Oosterbaan

Factoid of the week


Open comms

Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post. 

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is: 


Search for it on any Eth 2.0 block explorer site.

New episodes of “Mapping Out Eth 2.0.” with Christine Kim and Consensys’ Ben Edgington air every Thursday. Listen and subscribe through the CoinDesk podcast feed on Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, IHeartRadio or RSS.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to to register and buy your pass now.