A professor from Cornell university revealed at the Genesis London Conference that the university had conducted a study to examine and analyze the decentralization of the top two cryptocurrencies Bitcoin (BTC) and Ethereum (ETH).
The study focused on the location and ownership of nodes to determine its results. Criteria for decentralization included whether a node was owned by a business/organization or an individual, as well as whether a node was in a country or region considered to be an active crypto mining hub.
The study found that Ethereum was more decentralized than Bitcoin with more nodes owned by individuals than Bitcoin, which reportedly has more nodes in the hands of data centers and mining pools.
“The data shows that the [Ethereum] nodes are both in the latency space, and also geographically more distributed round the world. Ethereum nodes tend to come from all sorts of places, smaller networks, and homegrown entities, as opposed to Bitcoin nodes, which tend to be located in data centres. Our study found that the majority of Bitcoin nodes, 56%, are in data centres.”
Both Ethereum and Bitcoin started out using the Proof-of-Work (PoW) system in which “miners” use computer processing power to solve algorithms and uncover new units of currency, but Ethereum is set to switch to a Proof-of-Stake (PoS) system.
The PoW system helps prevent 51 percent attacks on the network by generally making it unviably expensive to do so, but it has its drawbacks – by creating conglomerates of miners called “mining pools,” the theoretically decentralized network risks under the control of large groups working together instead of individuals as originally planned. Were mining pools to control over half of a cryptocurrency’s hash rate, a 51 percent attack like the one Verge suffered could occur.
Professor Emin Gün Sirer. a computer scientist and cryptocurrency expert, believes that blockchain technology will play a larger role in business in the future, citing institutions, conglomerates, retailers and companies as suitable candidates for decentralized blockchain systems. However, he felt that it would take a long time to effectively commercialize the space, and that blockchain technology is still in its infancy.
Blockchains actually constitute an enormous opportunity to rethink the way we build backend systems. Instead of building things in the old fashioned way, with centralised databases that talk to each other, that need to be reconciled, that need to be kept in sync, we can actually now build much more efficient distributed databases that share information naturally, in a seamless manner.