DeFi's windfall, ConsenSys researchers find that DeFi is driving Ethereum decentralization

Whenever you talk about the decentralization of the blockchain, you will soon enter the topic of mining pools. However, the team from ConsenSys research suggests that you should also look elsewhere when exploring decentralization.


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In a paper titled " Measuring Blockchain Decentralization," researchers Everett Muzzy and Mally Anderson attempted to quantify "the decentralization of the Ethereum network over time." After looking at various on-chain indicators, they concluded that the decentralization of Ethereum benefits from DeFi prosperity and other factors, even as miners and mining pools become more concentrated.

After spending some introductory text explaining the difficulty of the term decentralization, Muzzy and Anderson put forward some on-chain factors they can measure in this paper, emphasizing that it is difficult to say that any of them is important for decentralization Sex.

Ethereum locked in DeFi application hits record high

According to data from the data analysis website DeFi Pulse, the number of Ethereum (ETH) stored in decentralized financial (DeFi) applications has reached a new milestone: 2.7 million ETH.

The paper first points out the Ethereum account. Researchers have found that although accounts have grown over time, the number of active accounts has remained more or less unchanged since the 2017 bubble. However, since the bubble, the number of accounts with "meaningful non-zero" ETH balances has increased, suggesting that there will be more holders in the future. In addition, they found that the concentration of Ethereum's wealth is becoming increasingly scattered in general, and the percentage of funds concentrated in the top ten and top one hundred addresses has steadily decreased.

And it's not just ETH-research shows that "users are using more ERC-20 tokens and using them more and more", and Muzzy and Anderson see this as another decentralized indicator.

In addition to account statistics, researchers have found that decentralized finance (DeFi) is another source of decentralization. The two authors expressed initial skepticism that DeFi is related to de facto decentralization. They wrote: "It is not enough to just claim that any financial instrument on the blockchain is decentralized." In the use of DEX Separated from other DeFi usage, they found: "In fact, the latest DeFi wave has introduced many new protocols and adoption rates are rising."

However, Muzzy and Anderson clarified in an email to Decrypt that the mere growth of DeFi is not enough to show the decentralization trend. "This is why we are paying closer attention to address activity to determine if the number of addresses interacting with the DeFi protocol is increasing," they said. The increase in addresses that interact with multiple protocols and lock addresses into them tells us "about DeFi A more complete story of the (evolving) decentralization of the ecosystem ", rather than just saying" these protocols are decentralized "and" there are many such protocols. "

At the end of the report, researchers saved two of the most common data sets used to determine decentralization: mining pools and node distributions. Despite their active adjustments to the findings, both have become more centralized.

The authors found that the number of nodes on the network is now less than last year. However, they went on to say that there are still many unknowns: new laws, regime changes, and grid instability may suddenly and fundamentally change the distribution of nodes. The author said: "Of course, we have to spend a little effort to get the node data … but over time it will be difficult to obtain, verify or track."

Mining is another area plagued by centralization. Muzzy and Anderson explained that four mining pools (Ethermine, SparkPool, F2Pool, and NanoPool) controlled nearly three-quarters of the block production. In fact, the first two account for 50%.

However, according to researchers, this is not necessarily problematic because miners "will migrate to any mining pool that provides the best incentives. If we assume the rational behavior of miners, the computing power of a single mining pool is close to 50% or Obviously able to conspire with other mining pools to launch a 51% attack, then miners will abandon these mining pools to protect their income. "Even so, even if rational behavior is taken, they still warn the ecosystem to pay attention to the centralization of mining pools.

Coinbase sparks interest explosion in DeFi

According to the latest report from cryptocurrency credit company Graychain, "Crypto Credit Report", interest in decentralized finance (DeFi) has grown rapidly in the last quarter.

According to anonymous blockchain researcher Hasu, there is some evidence that their views are correct. He pointed out an example of a Bitcoin mining pool,, in 2014, which attracted miners through a no-charge policy and gained nearly half of the computing power of the Bitcoin network. Sudden centralization shook "trust in the system" and led some to sell their bitcoins.

"Since then, individual miners have fled the pool in large numbers to protect their investments." Market panic will have a huge negative impact on its bottom line. "

In addition, the author also cautiously pointed out that the transition of Ethereum to Proof of Stake (PoS) will change the network dynamics, because miners give way to mortgagors, and sharding reduces the operating burden of nodes. However, DeFi may not disappear.

Therefore, although miners are increasingly concentrated in mining pools and the signals about the distribution of nodes are unclear, the authors describe the increase in the degree of decentralization over time. As they said: "As the amount of activity on Ethereum is increasing every day, new players enter the field, and the emergence of ETH 2.0, we remain confident in the end of Ethereum's steady decentralization.

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