Blockchain is more often than not touted as it enables an almost utopian financial system. In an ideal world, blockchain is completely decentralized and every user is treated equally. But unfortunately reality is sometimes different from what you would like. In a new study, Trail of Bits explains why some blockchains are actually not so decentralized at all.
Are #blockchains actually decentralized? Analysis we commissioned from @trailofbits uncovers unintended centralities and provides important insights on the potential impacts of security vulnerabilities within this technology. Access the full report here: https://t.co/V36rSOmvJc pic.twitter.com/WCbv7m9WQy
— DARPA (@DARPA) June 21, 2022
Blockchain unintentionally central
The research is called ‘Uninteded centralities in distributed ledgers‘ and was commissioned by the Defense Advanced Research Projects Agency (DARPA), part of the United States Department of Defense. As the name implies, the researchers think that the surprisingly central properties are not necessarily conscious.
Trail of Bits explains on behalf of the ministry that there are different ways in which a blockchain and distributed ledger technology (DLT) can generally be centralized. For example, the network itself can be centralized, but also the parties that have authority over the blockchain, the mechanism that controls the transactions, and even the motivations to use a particular blockchain.
You can identify a centralized network, for example, by looking at who owns the tokens, and whether, for example, a small group of people have a disproportionately large share in it. Or a network depends on one central point. If this fails, the network is automatically unusable.
Criticism of Bitcoin, Ethereum, Solana
The study cites a large number of examples. For example, 60% of all bitcoin (BTC) transactions would be sent through just three Internet Service Providers (ISPs). If you want to shut down the Bitcoin network with a 51% attack, you ‘only’ have to shut down the four largest mining pools. For Ethereum (ETH), you only need two for nefarious purposes.
Solana (SOL) is also criticized. If you owned 30% of the strike on Solana, that’s enough to pause the network. Solana is said to be almost five times less decentralized than Bitcoin. At the beginning of this week, controversy arose around Solana, because a project running on SOL wanted to take over a wallet from a whale. Avalanche (AVAX) is even more extreme, that network is about six times less decentralized.