Russian Expert Discusses End of Internet Anonymity With Passport-Based Access

September 26, 2024 Bitcoin.com

Ethereum staking services agree to 22% limit of all validators

September 1, 2023 Coin Telegraph

The 22% self-limit rule ensures at least four major staking entities would need to collude in order for the chain to reach finalization.

At least five Ethereum liquid staking providers have either imposed or are working to impose a self-limit rule in which they promise not to own more than 22% of the Ethereum staking market — seen as a move to ensure the Ethereum network remains decentralized.

Among the Ethereum staking providers either already committed or are working to commit to the self-limit rule include Rocket Pool, StakeWise, Stader Labs and Diva Staking, according to Ethereum core developer Superphiz.

Puffer Finance, another liquid staking service, also announced its commitment to the self-limit.

These providers are committed (or are in the process of committing) to self-limit to @Rocket_Pool @stakewise_io @staderlabs @divastaking
— superphiz.eth ️ (@superphiz) August 30, 2023

The proposal presumably aims to address concerns of Ethereum staking becoming increasingly centralized.

As to why the self-limit was proposed at 22%, Superphiz explained that because 66% of validators need to agree on the state of Ethereum, setting the limit below 22% means at least four major entities must collude in order for the chain to reach finalization.

Finality is the point where transactions on a blockchain are considered immutable, supposedly ensuring that transactions within a block cannot be altered.

The idea was proposed by Superphiz in May 2022 when he questioned whether a staking pool would be willing to put the health of the chain before its own profits.

Interestingly, the largest Ethereum liquid staking provider, Lido Finance, voted by a 99.81% majority not to self-limit back in June.

“They have expressed an intention to control the majority of validators on the beacon chain,” Superphiz said in an Aug. 31 post.

Votes casted from Lido (LDO) token holders on the self-limiting proposal. Source: Snapshot

Lido currently dominates the Ethereum staking market, accounting 32.4% of all staked Ether, while the next entity, Coinbase, accounts for only 8.7% of the market, according to data from Dune Analytics.

*Ethereum stakers by staking amount and market share, showing that Lido is the only one above the 22% threshold. Source: Dune Analytics*

Who’s in the right? Mixed reactions from the Ethereum community

One industry pundit, “Mippo,” explained on Aug. 31 that the self-limit proposal has nothing to do with “Ethereum alignment” — a principle understood to enable credible neutrality and permissionless innovation on Ethereum.

Mippo claimed those trying to push the proposal wouldn’t make way if they were in Lido’s position.

“Everyone is doing the economically selfish and rational thing here,” Mippo concluded.

Yeah because they have way less market share than that now… easy to chirp from the cheap seats.

This has nothing to do with “Ethereum alignment.” None of these teams would self limit were they in Lido’s place.

Everyone is doing the economically selfish and rational thing…
— Mippo (@MikeIppolito_) August 31, 2023

“Folks in the ETH community should not shame more user-friendly solutions as greedy products,” said another observer.

However, others were more wary of the potential centralization issues at hand, describing Lido’s market share dominance as “disgusting and selfish.”

Magazine: DeFi Dad, Hall of Flame: Ethereum is ‘woefully undervalued’ but growing more powerful

DeSo offers $1M bounty for building decentralized Reddit

July 6, 2023 Coin Telegraph

DeSo offers M bounty for building decentralized Reddit

Centralization

Developers pointed out the "monopolization of content and data" in centralized social media platforms as a need to create a decentralized alternative.

Via a July 6 announcement, decentralized social media protocol DeSo has issued a $1 million bounty for building a competitor to Reddit using its native blockchain. In supporting the decision, developers wrote:

"Reddit recently sparked controversy within its community following a decision to limit API access. This move provoked a series of 48-hour subreddit blackouts in protest. This price hike for their API has forced existing third-party developers to shut down as maintaining their applications becomes impossible."

"This controversy and others highlight the ongoing problems with centralized social media platforms," developers said, while also pointing out Elon Musk's controversial decision to impose reading limits on new and verified accounts on Twitter, citing "extreme levels of data scraping & system manipulation." Nader Al-Naji, founder of DeSo, highlighted a shift where users embrace autonomy over social content, as with owning Bitcoin (BTC) with money:

"These protests represent a broader societal shift. They are indicative of a new paradigm in how creators and users interact with social media."

Founded in 2019, DeSo offers monetization features such as creator coins, nonfungible tokens, tokens, and tipping. The firm claims to store user identity, profiles, content, and social graph 100% on-chain, and these content cannot be banned or blocked on a protocol level. Recently, the firm released new in-app proposals such as Openfund 2.0, a decentralized exchange platform.

In September 2021, DeSo raised $200 million in funding led by a16z, Coinbase Ventures, Sequoia, Pantera Capital, and others, including, perhaps ironically, Reddit co-founder Alexis Ohanian. Currently, over 150 projects are listed on the DeSo community, although their market caps are somewhat small.

Magazine: Decentralized social media: The next big thing in crypto?

Lido, Rocket Pool team members argue over decentralization

July 4, 2023 Coin Telegraph

Centralization

A Lido team member claimed Rocket Pool is not really governed by its DAO, but Rocket Pool community members pushed back, claiming the protocol is becoming more decentralized.

A team member for Lido has accused competitor Rocket Pool of being too centralized in a July 4 social media post. Both Lido and Rocket Pool are liquid staking protocols that allow users to delegate their cryptocurrency to validators and receive derivative tokens in exchange.

According to the post from Lido's community staking lead Dmitry Gusakov, the Rocket Pool contracts are controlled by the Rocket Pool team, allowing the team to change any parameters and call any method. This means that Rocket Pool developers can increase the inflation rate to an arbitrarily large percentage or increase fees to up to 100%.

Gusakov claimed this vulnerability does not exist in Lido’s contracts, as in Lido, these actions are “fully controlled by [decentralized autonomous organization] LidoDAO.”

Rocket Pool Grants Management Committee member Waq responded to the accusation, stating that the vulnerability was already known to the team and will be fixed in the future. Waq accused the Lido team of trying to take credit for discovering an issue that was already known.

Here we go again with the "brand new" discoveries of @Rocket_Pool being super malicious again Not a single word of how the community has been working for over a year on fixing this and the progress we're making. Once we fix this, they'll rush to take the credit like always.
— Waq | Rocket Fuel (@waqwaqattack) July 4, 2023

According to Gusakov's post, the RocketStorage contract at Ethereum address 0x1d8f8f00cfa6758d7bE78336684788Fb0ee0Fa46 contains a parameter called “guardian.” Many functions in Rocket Pool contracts are also labeled as “onlyGuardian,” meaning they can only be called by the account listed in this parameter, which is currently set to the RocketPool deployer account at 0x0cCF14983364A7735d369879603930Afe10df21e.

Actions that can be performed by the “guardian” include changing the “RPL InflationIntervalRate” and the “ETH DepositFee,” implying that the team can increase the inflation rate of the Rocket Pool governance token (RPL) or remove users’ deposits by setting the fee to 100%, Gusakov stated.

Content creator Chris Blec shared the post, claiming that it proves “‘pDAO is not a DAO” or that RPL token-holders are not actually in control of Rocket Pool’s governance.

In response, RocketPool community advocate Jasper.lens stated that the community is already aware of this centralization issue, which will be patched in the upcoming Saturn upgrade. According to Jasper, the centralization occurred during a period when voting systems for Rocket Pool’s DAO were still being designed and tested. The team decided to not allow the DAO to practice on-chain voting in the initial testing phase. However, testing has now been completed, and the upcoming Saturn upgrade “is all about patching the decentralization holes.”

In a comment agreeing with Jasper.lens’ post, Waq claimed that the Rocket Pool community “has been working for over a year on fixing this” and predicted the Lido team would “rush to take the credit like always” once the problem is fixed.

Liquid staking protocols have been growing in popularity over the past few months. On May 1, blockchain analytics platform DefiLlama stated that these protocols have surpassed decentralized exchanges as the top DeFi category in terms of total value locked. On May 30, Tenet partnered with LayerZero to implement liquid staking on more blockchains in the future.

Bitcoin hashrate recovers after big freeze shuts down miners

December 26, 2022 Coin Telegraph

Argo

The Bitcoin network hashrate has returned to 241.29 EH/s after a temporary 38% fall to 170.60 EH/s from a weekly peak of 276.40 EH/s.

Bitcoin’s network hashrate has returned to regular levels again, days after freezing temperatures across the United States put a strain on the nation's electricity grid — leading to a temporary drop in hashrate.

In the days leading up to Christmas, bone-chilling temperatures swept across the United States, leading to millions without power and claiming at least 28 lives.

According to reports, Bitcoin miners in Texas, which accounts for a significant portion of the country's hashrate, voluntarily curtailed operations to give power back to the grid — so that residents can keep their homes heated.

The disruptions appear to have put a dent in Bitcoin’s hashrate, which typically hovers around 225-300 Exahashes per second (EH/s). This fell to 170.60 EH/s on Dec. 25.

As of Dec. 26 however, the hashrate has returned to 241.29 EH/s, according to data from hashrate mining calculator CoinWarz.

Bitcoin’s hashrate is calculated by measuring the number of hashes produced by Bitcoin miners trying to solve the next block. It is regarded as a key metric in assessing how secure the Bitcoin network is.

The recent events prompted a controversial statement from FutureBit founder John Stefanop, who suggested the fall in hashrate was due to a number of “highly centralized mines” in Texas turning off at the same time.

“I know, does not change the fact that a few large mines in Texas affect the entire network to the tune of 33%...everyones transactions are now being confirmed 30% slower because the hashrate is not decentralized enough,” he said.

“If hashrate was distributed evenly around the world by 10’s of millions of small miners instead of a few dozen massive mines, this event would not have even registered on the network,” Stefanop added.

Bitcoin bull Dan Held however refuted Stefanop’s take on the events, arguing that weather patterns do not mean centralized ownership or control.

According to the Cambridge Bitcoin Electricity Consumption Index, the United States accounts for 37.84% of the average monthly hashrate share. The top four states in the country for Bitcoin mining include New York, Kentucky, Georgia and Texas — all of which had experienced power outages due to the winter storm.

However, Dennis Porter, the CEO of Bitcoin mining advocacy group Satoshi Action Fund noted to his 127,400 Twitter followers on Dec. 25 that while the inclement weather, particularly in Texas, caused 30% of Bitcoin’s hashrate in the United States to go offline, the network “continues to work perfectly.”

Over 30% of the #Bitcoin hashrate has gone offline due to extreme weather in Texas and yet the global #Bitcoin network continues to work perfectly.

Now imagine if Amazon or Google tried turning off 1/3rd of their data centers. pic.twitter.com/G49iqBZXDL
— Dennis Porter (@Dennis_Porter_) December 25, 2022

Cheap power and favorable mining regulation in Texas has led to a Bitcoin mining boom in Texas in recent months, which is now host to some of the largest mining companies in the world.

Among those Riot Blockchain, Argo, Bitdeer, Argo, Compute North, Genesis Digital Assets and Core Scientific — who’ve recently received a $37.4 million bankruptcy loan to stay afloat.

However recent weather events have only added to Bitcoin mining companies’ list of headaches.

The bear market has plagued Bitcoin mining companies to the tune of $4 billion in debt, according to recent data.

Many notable U.S. based mining companies have filed for bankruptcy in recent months too, while many other companies are approaching near-insurmountable debt-to-equity ratios that require immediate restructuring.

The tragic weather events haven’t impacted the price of Bitcoin (BTC) thus far, which is currently priced at $16,826 — only down 0.27 over the last 24 hours.

Paxful to Drop Ethereum Trading Due to Increased Centralization and Consensus Mechanism Pivot

December 22, 2022 Bitcoin.com

Vitalik on Suspect Centralization, FTX’s ‘Absolute Fraud,’ Coinbase Confirms Bitcoin Holdings — Week in Review

November 27, 2022 Bitcoin.com

Vitalik Buterin offers lessons for crypto in wake of the FTX collapse

November 21, 2022 Coin Telegraph

Centralization

Ethereum co-founder Vitalik Buterin said the collapse of FTX has illustrated once again that the problem lies in people, not technology.

Ethereum co-founder Vitalik Buterin has spoken out in the wake of the FTX collapse, offering his thoughts and some positives from one of crypto’s biggest black swan events.

In a Nov. 20 Bloomberg interview, Buterin said that the collapse of FTX contains lessons for the entire crypto ecosystem.

He acknowledged that the underlying stability of distributed ledger and the technology powering the crypto asset economy has not come into question. The problem in this instance (and several before it) has been people, not technology.

Buterin also labeled the FTX collapse as a “huge tragedy” but added that it reaffirms the position of many in the Ethereum community concerning centralization:

“That said, many in the Ethereum community also see the situation as a validation of things they believed in all along: centralized anything is by default suspect.”

He added that this ethos includes trusting in open and transparent code above humans. Over the weekend, Buterin posted a guide to having a “safe CEX” with proof of insolvency.

He said rather than relying solely on “fiat methods” such as government licenses, auditors, corporate governance, and background investigations of people running exchanges, the exchanges could create “cryptographic proofs that show that the funds they hold on-chain are enough to cover their liabilities to their users.”

Having a safe CEX: proof of solvency and beyondhttps://t.co/AKEweYZfj2

Big thanks to @balajis and staff from @coinbase @binance @krakenfx for discussion!
— vitalik.eth (@VitalikButerin) November 19, 2022

The problems for FTX are understood to have stemmed from the exchange’s use of customer deposits for other purposes. After a large influx of withdrawal requests came to the exchange earlier this month, it found itself unable to meet withdrawal demand with its current liquidity.

Vitalik Buterin is not the only industry leader recently speaking out about the FTX fallout. On Nov. 17, Binance CEO Changpeng Zhao said that while regulation is necessary, it is more important for industry players to lead by example.

During the Indonesia Fintech Summit 2022, Zhao said the entire FTX saga is likely to have set back the crypto industry by “a few years,” and will likely see regulators scrutinize the industry “much, much harder, which is probably a good thing, to be honest.”

Proof-of-Work Proponents Question Validator Censorship as 59% of Staked Ethereum Is Held by 4 Companies

September 16, 2022 Bitcoin.com

Blockchain isn’t as decentralized as you think: Defense agency report

June 22, 2022 Coin Telegraph

Centralization

The report published Tuesday highlights several scenarios in which various actors can garner excessive, centralized control of a blockchain system.

Distributed ledger technology (DLT) and blockchains including Bitcoin and Ethereum may be more vulnerable to centralization risks than initially thought, according to Trail of Bits.

The security firm on Tuesday released its report titled “Are Blockchains Decentralized?”, which was commissioned by the U.S. Government’s Defense Advanced Research Projects Agency (DARPA).

The report aims to investigate whether blockchains including Bitcoin and Ethereum are truly decentralized, though the report appeared to focus largely on Bitcoin.

Among its key findings, the security firm found that outdated Bitcoin nodes, unencrypted blockchain mining pools and a majority of unencrypted Bitcoin network traffic traversing over only a limited number of ISPs could leave room for various actors to garner excessive, centralized control over the network.

Bitcoin nodes

The report stated that a subnetwork of Bitcoin nodes is largely responsible for reaching consensus and communicating with miners and that a “vast majority of nodes do not meaningfully contribute to the health of the network.”

It also found that 21% of Bitcoin nodes are running an older version of the Bitcoin Core client, which is known to have vulnerability concerns such as consensus errors. It states that “it is vital that all DLT nodes operate on the same latest version of software, otherwise, consensus errors can occur and lead to a blockchain fork.”

A Bitcoin node is any computer that stores and verifies blocks in the blockchain. Nodes are used to monitor the health and security of the Bitcoin blockchain and validate the accuracy of transactions. The current version all nodes should run is Bitcoin Core 22.0.

Another takeaway from the report found that Bitcoin’s mining pool protocol Stratum is unencrypted and essentially unauthenticated.

This means that malicious attacks can be made to “estimate the hashrate and payouts of a miner in the pool” and “manipulate Stratum messages to steal CPU cycles and payouts from mining pool participants.”

Funneling through ISPs

The authors also found vulnerabilities in the infrastructure, based on the fact that Bitcoin protocol traffic is unencrypted and 60% of the network traffic traverses only three ISPs.

This is a problem because “ISPs and hosting providers have the ability to arbitrarily degrade or deny service to any node.”

Twenty-six pages of detailed information, data, and infographics are contained within the report. DARPA started in 1958, and is responsible for the development of emerging technologies for use by the agency of the United States Department of Defense and the US military. Trail of Bits is a cybersecurity research and consulting firm that was engaged by DARPA to develop the report.

The report comes at interesting timing, after centralization concerns were highlighted on Solana.

On Sunday, Solana-based decentralized finance (DeFi) lending protocol Solend put together a spur-of-the-moment governance proposal aimed at taking over a whale’s wallet that was facing liquidation which was threatening to put a strain on Solend and its users.

The proposal which was passed by one whale, saw immediate kickback from Twitter, and the creation of another governance vote to invalidate the previously approved proposal. Observers arguing the move could cause damage to the overall image of DeFi as taking control of one of Solend’s wallets means the fundamental principles of DeFi fall into question and reversing a vote wasn't much better.

Centralization

Who’s in the right? Mixed reactions from the Ethereum community

Bitcoin nodes

Funneling through ISPs

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