Decentralization in PoS Networks: 𝘁𝗵𝗲 𝗗𝗮𝗿𝗸 𝗦𝗶𝗱𝗲 𝗼𝗳 𝘁𝗵𝗲 𝗠𝗼𝗼𝗻

Overview:

• Analyzing validator decentralization on a geographical & infra scale in PoS networks via Messari's report.

• Positioning 𝗣𝗼𝗹𝗸𝗮𝗱𝗼𝘁 amongst other networks.

• Spotting the vulnerabilities.

• Solutions for creating unstoppable PoS networks.

𝗖𝗹𝗶𝗲𝗻𝘁 𝗗𝗶𝘃𝗲𝗿𝘀𝗶𝘁𝘆: Most networks, except Ethereum, rely heavily on single-client software. 𝘙𝘪𝘴𝘬𝘴: A bug in this client can compromise the entire network.

E.g. Solana has experienced this issue, which led to a client fork. And now there exist 2 clients with a 3rd in development.

Ethereum also suffered from an error in Geth clients in 2016, causing block confirmation to a halt.

Spotlight on Polkadot: is dependent on Parity's client atm.

But @soramitsu_co's Kagome (C++) and @ChainSafeth's Gossamer (Go) are in development and available in testnet.

𝗔𝗰𝘁𝗶𝘃𝗲 𝗩𝗮𝗹𝗶𝗱𝗮𝘁𝗼𝗿 𝗡𝗼𝗱𝗲 𝗛𝗼𝘀𝘁𝗶𝗻𝗴 𝗗𝗶𝘀𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻: Many blockchains also heavily depend on a few network providers, especially AWS, OVH and Hetzner.

This reliance, a result of self-hosting difficulties and cost-effectiveness, creates a single point of failure.

Polkadot and Cardano are less reliant on a single network provider, while over 60% of Aptos and Avalanche's validator nodes use 2-3 network providers.

𝗧𝗵𝗲 𝗰𝗼𝗻𝗰𝗲𝗻𝘁𝗿𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝘀𝘁𝗮𝗸𝗲 𝗼𝗻 𝗔𝗪𝗦(Amazon Web Services):

• Avalanche: 67%
• Aptos: 43%
• Near: 35%
• Cardano: 30%
• Solana: 17%
• 𝗣𝗼𝗹𝗸𝗮𝗱𝗼𝘁: ~7% ; meanwhile OVH as being the highest concentrated network provider by 17%.

Solana and Polkadot are least dependent on a single network provider. But still, when combined with their top three network providers, they surpass the 33% risk threshold.

𝘙𝘪𝘴𝘬𝘴: An outage, regulation, or crypto-related ban affecting these providers could seriously impact networks.

𝗚𝗲𝗼𝗴𝗿𝗮𝗽𝗵𝗶𝗰 𝗗𝗶𝘀𝘁𝗿𝗶𝗯𝘂𝘁𝗶𝗼𝗻: It's crystal clear that there is a dominance of EU and US here for all networks, due to their cost-efficiency and accessibility advantages.

Even though Avalanche has greater presence across low-tier regions, its 31% of active stake is on US.

Together with Germany 46% of stake of Avalanche is concentrated only 2 country.

This is also caused by AWS.

• Cardano: US + Germany = 51%
• Solana: US + Germany = 39%
• Polkadot: US + Germany = 35%
• Near: US + Germany = 33%
• Aptos is not concentrated on US just like Polkadot but if we add Korea to US + Germany -> 50%

Except Aptos all of them are exceeding critical 33% stake threshold only with two countries.

Spotlight on Polkadot: EU is accounted for 68% of public rewards.

There is no concentration on US due to not being reliant on AWS like others. But there is a heavy dependency on Europe.

And still >60% active validators are based on EU.

𝘙𝘪𝘴𝘬𝘴: Client diversity might have a bigger impact if any vulnerability occurs, but there has to be considered the future risks: what if a country where a significant % of nodes located decides to enact regulations or bans any crypto-related activities?

Silver lining: China's banning BTC and Hetzner canceling crypto operations didn't cause any major damage.

𝗦𝗵𝗼𝗿𝘁-𝗺𝗶𝗱 𝘁𝗲𝗿𝗺 𝘀𝗼𝗹𝘂𝘁𝗶𝗼𝗻𝘀: Encouraging self-hosting and local validators.

Creating incentivizes to establish infra on other regions beyond US, EU and Asia.

E.g. in Polkadot, a treasury funded project IBP - Infra Builder Program aims to support building infra in the locations typically overlooked due to cost concerns.

Solana Foundation Delegation Program incentivizing the use of data centers hosting fewer than 10% of validators.

𝗪𝗵𝗮𝘁 𝗮𝗯𝗼𝘂𝘁 𝗘𝘁𝗵𝗲𝗿𝗲𝘂𝗺? There exists challenges there as well.

E.g. -> staking pool diversity, with nearly a third (33%) of pool shares are on Lido.

Furthermore, approx. 50% of the Ethereum nodes are operating in the US, and this increases to 67% when combined with nodes in Germany.

And over half of US based nodes are in a single data center, 20 min away from the CIA HQ. Therefore, initiatives like @ether_fi's Operation Solo Staking are significant in mid-long term.

Also solutions like DVT (Distributed Validator Tech) are emerging to reduce the chances of a single point of failure.

As a result, @divastaking is preparing to launch its mainnet for DVT this week.

Although Ethereum's validator count is impressively high, ~ 630K, the core devs are now contemplating increasing the upper bound of validator stake to 2048 ETH to sustain network throughput over time.

Hopefully this will calm down the validator number maximalism. After all, the control over the PoS Networks depends on the stake.

𝑁𝑜𝑡 𝑜𝑛𝑙𝑦 𝑡ℎ𝑒 𝑝𝑜𝑖𝑛𝑡𝑠 𝑚𝑒𝑛𝑡𝑖𝑜𝑛𝑒𝑑 𝑎𝑏𝑜𝑣𝑒, 𝑏𝑢𝑡 𝑎𝑙𝑠𝑜 𝑜𝑡ℎ𝑒𝑟 𝑐𝑜𝑛𝑠𝑖𝑑𝑒𝑟𝑎𝑡𝑖𝑜𝑛𝑠 𝑓𝑜𝑟 𝑛𝑒𝑡𝑤𝑜𝑟𝑘𝑠 𝑠ℎ𝑜𝑢𝑙𝑑 𝑖𝑛𝑐𝑙𝑢𝑑𝑒:

• Staking Accessibility: How easy is it for someone to become a validator?

• Network Governance: Who has the "control" of decision-making? Do validators have a say in network gov like in Cosmos ecosystem? What kind of impacts and politics does this introduce?

• Trade-offs: in terms of providing decentralization?

𝗢𝘃𝗲𝗿𝗮𝗹𝗹, 𝘁𝗵𝗲 𝗳𝘂𝘁𝘂𝗿𝗲 𝗼𝗳 𝗣𝗼𝗦 𝗻𝗲𝘁𝘄𝗼𝗿𝗸𝘀 𝗹𝗶𝗲𝘀 𝗶𝗻 𝗼𝘃𝗲𝗿𝗰𝗼𝗺𝗶𝗻𝗴 𝗮𝗹𝗹 𝘁𝗵𝗲𝘀𝗲 𝗰𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝘀 𝗮𝗻𝗱 𝗲𝗺𝗯𝗿𝗮𝗰𝗶𝗻𝗴 𝘁𝗵𝗲 𝗱𝗲𝗰𝗲𝗻𝘁𝗿𝗮𝗹𝗶𝘇𝗮𝘁𝗶𝗼𝗻 𝗮𝘀 𝗮 𝘁𝗼𝗼𝗹 𝘁𝗼 𝗯𝗲𝗰𝗼𝗺𝗲 𝘂𝗻𝘀𝘁𝗼𝗽𝗽𝗮𝗯𝗹𝗲 𝗻𝗲𝘁𝘄𝗼𝗿𝗸𝘀.