https://mirror.xyz/bouran.eth/zyE_V4XIGndYxmmoLiHkTM66GO36dkCMjwuOCsUOQA4

, we looked at how to define and measure decentralisation.

This time we will introduce four of the main blockchains - Ethereum, Polkadot, Avalanche, and Solana - and dive into the differential elements of how they work.

Ethereum

The chain which today has the highest total value locked (TVL) was first conceived in 2013 by Vitalik Buterin. Development started in 2014, was crowdfunded by an Initial Coin Offering (ICO), and went live on July 30th, 2015.

Ethereum allows decentralised applications (DApps) to be built and for different token types to be deployed, for example, the ERC-20 standard is used for cryptocurrencies (fungible tokens) and ERC-721 for NFTs.

The Ethereum Virtual Machine (EVM) is one of the most broadly used elements of the network. It’s a software framework that executes smart contract bytecode from programming languages such as Solidity and integrates this into each node. The EVM’s purpose is to figure out what the state will be for each block, so that the network can be used as both a distributed ledger and for users to interact with smart contracts.

The network has just transitioned from a Proof-of-Work (PoW) consensus mechanism, where transactions are validated by computational power, to a Proof-of-Stake (PoS), which only requires validators to hold and stake tokens. This transition is known as ‘The Merge’ as the mainnet will be unified with the consensus layer, the Beacon Chain.

The swap to POS has been a long time coming, starting development in late 2019. It's one of the most crucial steps in the Ethereum 2.0 timeline, with the three main upgrades consisting of the Beacon Chain (live), The Merge (Sept 15 2022), and sharding (2023 ETA). We will be explaining these three upgrades in more detail in future articles.

While PoS is generally seen to have advantages such as being less energy intensive and better for implementing scaling solutions, there are also many misconceptions, such as the fact that it will reduce gas fees or make transactions faster.

Polkadot

Polkadot was founded by Gavin Wood, an Ethereum Co-founder, in late 2016. It was launched with an ICO in October 2017, raising $145 million in return for 50% of the token allocation. Two private sales were also later conducted in 2019 and the summer of 2020.

Polkadot has a central blockchain known as the ‘relay’ chain and many user-created parallel chains known as ‘parachains’. These are separate blockchains that connect to, and are interoperable with, the Polkadot relay chain and all other parachains. The network uses PoS with all validators staked on the relay chain. This means that all parachains share the security of the relay chain, which is a huge benefit to new projects who might otherwise have a low number of validators and be vulnerable to attack.

The network utilises the ‘Blind Assignment for Blockchain Extension’ (BABE) protocol for building the chain's blocks, such as ensuring that blocks have a consistent creation time and an assigned block author. It is derived from the Ouroboros consensus protocol, which was adapted by Gavin Wood, and is being developed by the Web3 Foundation and Parity Technologies.

The relay chain also provides interconnectivity with cross-consensus messaging known as XCM. It enables the parachains to securely exchange information and perform transactions without needing a trusted third party. This allows transfers of data or assets between different blockchains, and for cross-chain D’Apps to be built. It can be done without the need for a bridge which could potentially be unsecured and therefore liable to exploits. The interoperability and scalability this provides to projects will likely become increasingly important.

Teams can gain a slot to build a parachain by taking part in an auction, or from the Web3 Foundation allocating a slot to a project it believes will benefit the network. The permissionless auctions allow users to vote on which projects get priority with teams bidding for a slot. Users contribute by locking up their DOT tokens and teams then reward contributors. This system is popular with a lot of teams as it does not require a significant upfront cost for bidding and also means they will have strong support from launch if they win.

Polkadot's approach to governance is one of its core strengths, and the parachain auctions are one of the best examples of this.

Avalanche

The Avalanche chain was first shared on the InterPlanetary File System, a decentralised peer-to-peer file sharing protocol, by a pseudonymous group ‘Team Rocket’ in early 2018. It was later developed by a dedicated team from Cornell University led by Emin Gün Sirer, a professor of computer science.

Following this Ava Labs was created to help develop the network, using some of the best talent from Wall Street. Avalanche's ICO ended in July 2020, followed by the launch of the mainnet and native token issuance, later that year in September.

The network uses PoS with the ‘Snowball’ consensus and is designed to be very scalable. No matter how many participants the network has, the number of consensus messages sent will remain the same, because a node will only query twenty other nodes. It operates in a way similar to random audits which ensures the chain is in agreement.

Avalanche’s network provides a stable base for projects to launch finance-based D’Apps and allows a core focus on an interoperable, scalable ecosystem. Unlike other networks, Avalanche does not run on just one chain. It’s a multi-chain network made up of the Platform Chain (P-Chain), Contract Chain (C-Chain), and Exchange Chain (X-Chain). The three chains all serve different purposes, but put together they act with the power of one network.

The P-Chain is the metadata chain and allows users to create subnets, monitor active subnets, and maintain validators. Each chain runs a slightly different consensus mechanism tweaked for the specific requirements. In this case, ‘Snowman’, is optimised for a high number of transactions per second (TPS) and smart contract applications.

The C-Chain is EVM compatible and allows users to create smart contracts, using a specific API.

The X-Chain acts as a decentralised platform for creating and trading tokenised assets, with specific rules attached that help to govern its activity. This is the chain that the AVAX native token is traded on.

Subnets are Avalanche’s biggest scaling solution. They are sovereign networks that define their own computer logic, determine their own fee structure, maintain their own state, and provide their own security. This allows users to create their own blockchain, utilise validators, and piggyback onto Avalanches consensus latency (the speed at which a transaction occurs).

Solana

Solana was first proposed in a white paper in November 2017 by Anatoly Yakovenko. In 2018 the Solana Labs team began searching for funding and raised $20 million in private token sales in 2019, with the first block created in March 2020.

It claims to be the fastest blockchain in the world with the most rapidly growing ecosystem. The network is highly scalable, theoretically reaching 710k TPS (transactions per second) and processing 2.7k on average. In comparison, Ethereum currently handles only ∼15, Polkadot 1.5k, and Avalanche 4.5k (without counting subnets). This makes Solana’s usage really cheap: at the time of the writing, a transaction only costs $0.00025.

The network uses Proof-of-History (PoH), a key tech element, which makes scalability possible. It’s an upgraded version of PoS with the ability to process more transactions without having to rely on layer 2 solutions or sharding.

PoH is based on time. Many blockchains, like Ethereum, use outside programs to define a timestamp to validate transactions in the correct order. But this is an issue as it takes up processing power, Solana solves this quite easily by just building these timestamps into the chain itself. Validators don’t then need to allocate much power towards verifying multiple times.

Block validation is done by using a Verifiable Delay Function (VDF), a function within its PoH protocol, which takes the input and generates an output that can be chained with cryptographic hashing. This enables a faster block verification time.

The VDF is used for tracking time whereas the PoH chain includes hashes of data that has been processed. This is a double-edged sword because while it can track history; this history can also be manipulated by changing when the hash occurred. The PoH chain can’t serve as a good source of randomness, a VDF without that data could produce more pure random.

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The technology behind the four platforms we have looked at all function differently, with varying approaches to consensus mechanisms and block verification. They all aim to prioritise speed, cost, or scalability but to achieve this they have to sacrifice one. Maybe one day a chain will be able to achieve all three.

In the next article, we will introduce an Ethereum deep dive and explore its many quirks. We will also touch on significant events such as ‘The Merge’ and ‘Sharding’ upgrades.

It’s often seen to be the key differentiating aspect between web 2 and web 3 and is considered important for several reasons, such as giving more control back to individuals rather than organisations; and the ability to handle trust-less systems, whereby participants do not need a trusted third party for a seamless transaction. 

It is not always clear cut however, as it is possible to have decentralised traits while still being controlled by a central organisation. This creates a grey area between centralised and decentralised control and our aim is to explore this and provide some clarity. 

History of decentralisation

Open web

This was the stepping stone for decentralisation, a network made by and for all its users, not just selected organisations or governments. It allowed people to freely explore the internet and helped culture become closely intertwined with tech. Without it, all content could have ended up being reviewed and restricted by a centralised body.

Blockchain technology

First implemented in 2004 by a computer scientist named Hal Finney, he built upon previous ideas and created a ‘Reusable Proof of Works’. This solved the double-spending problem, the risk that a digital asset could be used twice or more when servers are not synchronised, by keeping a register of the ownership of tokens on a trusted central server. It was designed to allow users throughout the world to verify their correctness and integrity in real-time. 

Bitcoin

This was the first decentralised and scalable blockchain, created by the anonymous founder (or founders) known as Satoshi Nakamoto. It improved on previous designs by allowing transactions to be added to the chain without requiring them to be signed by trusted third parties - instead utilising a peer-to-peer network for verification. 

Decentralised networks like Bitcoin do not have a single authority that controls the chain but instead have infrastructure distributed across thousands of computer systems and networks.

Ethereum

Created in 2015 and designed to take the best elements from Bitcoin along with the ability to program and run software on the blockchain. Programmes stored on a blockchain that run when certain conditions are met are known as smart contracts and these enable developers to create apps that run on Ethereum's decentralised network, known as decentralised applications (DApps). 

Smart contracts also help decentralisation by allowing many use cases within a single blockchain. Ethereum is a diversified blockchain, unlike Bitcoin which has a singular focus on financial transactions, and is considered the primary infrastructure for DeFi (decentralised finance) and NFTs. Future growth will likely expand further into traditional markets such as real estate, office productivity, metaverse, social media and event management. 

Ethereum's popularity has caused problems however, including reduced scalability and higher network transaction ‘gas’ fees. This has resulted in numerous competitor blockchains developed with the goal of solving these issues. While most are fundamentally clones of Ethereum, known as Ethereum Virtual Machine (EVM) compatible, others like Solana are uniquely designed in ways that aren't based on or compatible with Ethereum.

Measuring decentralisation

Supply distribution and initial token allocations

This represents a measurable data point to view how decentralised a project is. The more diluted the supply is, the more distributed and spread out among a larger user base, then the less controllable and therefore more decentralised the token is.

Initial token allocations are split into public sale, community, insiders, and foundations. It is generally considered preferable to designate a larger proportion of the tokens for public sale. The chart below shows the initial allocations for most of the current big platforms. 

Number of nodes

The number of stored copies of the blockchain is important because it shows how many entities are securing a transaction. For example, there are currently 21 nodes on the Binance Smart Chain (BSC), compared to over 10,000 full nodes on Bitcoin. The number of nodes doesn’t inherently imply a chain is more or less decentralised, but along with supply distribution, it helps clearly define a level of decentralisation.

Power distribution

This can often be the most pivotal characteristic when trying to determine how decentralised a project is. There may be a multitude of nodes, but if all of these nodes are held between a small number of operators, then the project itself is still very centralised. For a truly decentralised project, the power should be distributed equally throughout all participants, ensuring that no one party has majority control. A phrase often heard in reference to power distribution is ‘a 51% attack’, which means that if one entity holds 51% of the power, it allows them to take control of the blockchain and pass any changes without a democratic consensus. Power distribution is something that must be monitored closely.

A good example of how power can be spread equitably across all participants is to use a Decentralised Autonomous Organisation, to create a democratic voting process when changes need to be made to a project. Members are often people from within the community who pledge their token or wallet signature towards a vote. A DAO can be a good solution for community engagement and also help ensure the project is aligned with the views of the community.

Foundations

An integral aspect to many decentralised protocols and a useful indicator of decentralisation, as it shows the focus is primarily on improving the project rather than maintaining a power base. The responsibilities of a foundation often includes the upkeep of project services, the timely releases of official updates, and nurturing the community surrounding the project, while not being directly attached to the project itself. The Web3 Foundation for example offers development grants, support to the Polkadot and Kusama blockchain teams, and runs free webinars and code camps. 

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From the origins of the open web and early blockchains to Ethereum’s smart contracts, we have seen that the technology is maturing over time. As more attention is drawn to how many use cases exist it’s likely that decentralised technology will play an increasing part in our future. 

In the next articles we’ll be delving into the details of supply and power distribution, node numbers and token allocation, and investigating whether some of the major platforms that claim to be decentralised actually live up to this.