Cryptocurrencies would be less decentralized than expected. And that already has tricky consequences.
One of the great advantages of cryptocurrency compared to traditional financial systems, according to many of its advocates, is that no corporation, central bank or government has control over them. However, this is not necessarily true. Researchers who worked on a study commissioned by the Defense Advanced Research Projects Agency (DARPA) discovered that there could be “unexpected centers” in these decentralized systems.
Cryptocurrencies would be less decentralized than expected
“The blockchain is assumed to be immutable and decentralized because the community says so,” says Dan Guido, CEO of Trail of Bits, the software security firm that conducted the study. The power of cryptocurrency is concentrated among the people and organizations who have a big slice of the pie. Like any capitalist system, some might say.
Trail of Bits defines these “unforeseen centers” as circumstances under which an entity has been able to influence a self-proclaimed decentralized system, which provides them with the opportunity to tamper with ownership records. The report also states that three ISPs alone handle 60% of all bitcoin traffic. A blockchain network could be totally disrupted if a communications regulator, hacker, or someone else who could oversee one of these ISPs were to slow down or stop bitcoin traffic.
There are also weaknesses in the bitcoin network itself. The study found that 21% of nodes are running old and vulnerable versions of the bitcoin client. These systems could be targeted by an attacker seeking to take over a blockchain network, although this seems highly unlikely given the size of the bitcoin network.
Some of these situations are only theoretical, but the study highlights some weak points of blockchain technologies. And there have already been some cases of centralization that have impacted the ecosystem.
And that already has tricky consequences
Last week, for example, lending platform Solend – which is based on the Solana blockchain – tried to take over its largest account, because it claimed the operator might have too much influence. on market movements. Solend had planned to take temporary control over this “whale” account to liquidate its positions “with dignity” and avoid any possible disruption.
A proposal allowing the platform to perform this operation – after all, Solend defines itself as a “decentralized protocol” – was accepted this Sunday. However, Solend users voted for another proposal to overturn the former, with 99.8% in favor of the latter. The owner of the account in question had more than one million of the 1.48 million total votes. Solend is trying another method to liquidate their positions, but right now all the power of this platform seems to be centralized in favor of the holder of this account.