Data center operator hosting 17% of Ethereum’s nodes says staking is not permitted

Hetzner Online, a data center based in Germany, said that using its hosting services for any application related to cryptocurrency mining is not permitted. The company disclosed its stance in a Reddit thread, saying that its ban on mining-related uses includes both Proof-of-Stake (PoS) and Proof-of-Work (PoW) applications.

The company’s stance on PoS applications could have serious implications on the Ethereum ecosystem, as 16.0% of Ethereum’s validator nodes are currently hosted on Hetzner’s servers.

Hetzner’s comments have been met with disapproval from the broader crypto community, with many criticizing the company for hosting cryptocurrency-related applications, including mining, for years without disclosing it in their terms of service.

Hetzner reveals the price of centralizing Ethereum nodes

As Ethereum gets closer to the Merge, the controversy surrounding its transition to a Proof-of-Stake (PoS) network seems to be increasing. Many have voiced their concerns over the current centralization of Ethereum’s validator nodes, saying that a transition to a PoS system would further exacerbate this problem.

The sanctioning of privacy-preserving services like Tornado Cash has also increased concerns over the possibility of censorship becoming ripe on the Ethereum network.

The larger conversation about Ethereum’s centralization arose last year after a Messari report revealed that a concerning percentage of Ethereum’s Mainnet nodes are hosted on a handful of centralized servers like AWS. With the Merge getting closer, the conversation about the centralization of Ethereum’s nodes has gotten hotter, with data showing that over 70% of them are hosted on three cloud providers — Amazon Web Services (AWS), Hetzner Online, and Oracle Cloud. Over 53% of Ethereum’s Mainnet nodes are hosted on AWS, while 16% are hosted on Hetzner.

And while many worried about…