It Turns Out Blockchain Isn’t As Decentralized As Many Think

From its inception, blockchains have been trying to integrate a common strategy – decentralized transfer of value. However, a report from Trail of Bits, published on June 21, tried to show whether blockchains like Bitcoin and Ethereum are truly decentralized.

The “Are Blockchains Decentralized?” report, commissioned by the United States government’s Defense Advanced Research Projects Agency (DARPA), found out that excessive and centralized control over the networks is not so hard to achieve, since, for instance, Bitcoin’s nodes are mainly outdated, while blockchain mining pools are largely unencrypted, as well as the traffic going to and from them.

Bitcoin nodes under attack

Trail of Bits highlighted that the “vast majority of nodes do not meaningfully contribute to the health of the network,” with 21% of Bitcoin nodes are running an older version of the Bitcoin Core client, which could lead to consensus errors.

“It is vital that all DLT nodes operate on the same latest version of the software, otherwise, consensus errors can occur and lead to a blockchain fork.” the report stated. Furthermore, Bitcoin’s mining pool protocol Stratum happened to be unencrypted and essentially unauthenticated. The report explained that malicious entities could possibly “manipulate Stratum messages to steal CPU cycles and payouts from mining pool participants,” which could ruin the mining game for smaller-scale miners.

ISPs joining centralization via funneling

The report also noted that 60% of the network traffic traverses only three ISPs. “ISPs and hosting providers have the ability to arbitrarily degrade or deny service to any node,” Trial of Bits added in its 26 pages of detailed information, data, and infographics.

The data, gathered by the security company, is being published amid growing centralization concerns, as Solana-based decentralized finance (DeFi) lending protocol Solend is causing stress among its users after whale liquidation concerns. In order to mitigate the consequences of an eventual liquidation, Solend pushed a spur-of-the-moment governance proposal, which was passed by one whale.

However, the proposal saw immense pressure on Twitter and ultimately the creation of another governance vote to invalidate the previously approved proposal. Twitter discussions came to the conclusion that the move could cause damage to the overall image of DeFi, denoting that the fundamental principles of DeFi fall into question when it comes to taking control of one of Solend’s wallets.

“No matter what the team does, there is no way to change the fact that assets deposited into the platform can be confiscated by the team at any time.  Escape from the platform is the best way out.  At any time the team can tweet an announcement to forfeit your assets.” some of the community members wrote.

The move is a direct consequence of a gruesome dilemma - if Solend took over the whale’s wallet it might save Solana from a DeFi implosion. However, the move shows that anyone’s assets can be confiscated within the platform and could cause a boycott among users.