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Blockchain and decentralization have become synonyms in the cryptocurrency industry. The use of blockchain applied science made information technology possible to create a network where all users are equal, and information is distributed over a countless number of computers in the world. Decentralization has gained a particular value for banks and other commercial institutions, since it brings a new dimension to the concepts of security and transparency.

A written report conducted in February 2022 by Professor Emin Gün Sirer demonstrated that Ethereum is much more than distributed than Bitcoin with nodes better spread out around the earth. This results in the Ethereum network existence more decentralized than its elder brother.

Well, "more than" doesn't necessarily mean "absolutely". Is Ethereum 100 percent decentralized, anyhow? This question has been oft raised by the community and developers over the past two years.

There are a lot of reasons supporting the argument, and many which are confronting it 1 such reason could be the manipulation of commissions within the network caused by the massive launch of the CryptoKitties online game, which turned characteristics as decentralization into a myth. Cointelegraph offers you either to ostend or disprove this and six more myths about Ethereum decentralization.

Myth 1: Decentralization means distribution

Myth 1: Decentralization means distribution

To better understand what decentralization means in the Ethereum blockchain environment let's refer to the concept as described by the network's founder Vitalik Buterin. On his Medium post, he expressed many important thoughts about the demand for decentralization and the means to accomplish it:

"Decentralization" is ane of the words that is used in the cryptoeconomics infinite the near oft, and is oft even viewed every bit a blockchain'south entire raison d'être"

Vitalik states that decentralization is 1 of the key concepts in blockchain, which is essential for protecting the networks from such problems as faults, attacks, and collusions. Although "thousands of hours of research" and development are aimed at achieving and improving decentralization, the exact meaning of the term is notwithstanding unclear.

Vitalik cites the example of the "completely unhelpful, but unfortunately all likewise common diagram" of decentralization, which has spread among users and fifty-fifty developers. Whereas the last two images should obviously be reversed since "decentralization means that none of the nodes has the ability to control the processing of all transactions on the network."

Myth 1: Decentralization means distribution

Image source: Vitalik Buterin Medium Mail service

Myth 2: Blockchain is resistant to errors

Myth 2: Blockchain is resistant to errors

What are nosotros supposed to do, if even developers themselves are confused about the definition of decentralization? To clarify the ambiguity, Buterin created his own classification, which tin can exist used to determine whether a network is centralized or non.

Myth 2: Blockchain is resistant to errors

Image source: Vitalik Buterin Medium Postal service

  • Architectural decentralization is based on the amount of concrete computers in a organisation. The more the number of those computers it tin can tolerate breaking down at any single time is, the stronger its decentralization is.
  • Political decentralization refers to the share of individuals or organizations ultimately decision-making the computers that the organisation is fabricated up of.
  • Logical decentralization is identified according to the interface and information structures form which tin can expect more like a single monolithic object, or an baggy swarm. One simple heuristic is: if yous cut the system in half, including both providers and users, will both halves continue to fully operate as independent units?

Often, architectural centralization leads to a political ane, although in computerized communities this can be avoided. The same cannot be said for logical centralization, which in plough makes it hard to grade an architectural and political decentralization.

Myth 3: The Ethereum network is protected against attacks

Myth 3: The Ethereum network is protected confronting attacks

What makes the network decentralized? These are 3 essential components that found the foundation of this unique characteristic. If at least 1 of them works incorrectly, the system can exist turned into a centralized entity:

Mistake tolerance — decentralized systems are less likely to fail accidentally because they rely on many separate components that are not probable to fail.

Assail resistance — decentralized systems are more than expensive to attack and destroy or manipulate because they lack sensitive central points that can be attacked at much lower cost than the economical size of the surrounding organization.

Collusion resistance — it is much harder for participants in decentralized systems to collude to act in ways that benefit them at the expense of other participants, whereas the leaderships of corporations and governments collude in means that benefit themselves but harm less well-coordinated citizens, customers, employees and the general public all the time.

It may seem that everything is simple - but at the protocol level, the situation looks somewhat dissimilar. For instance, fault tolerance is useless if for some reason a big number of component computers fail to process the blocks at in one case.

Vitalik Buterin cites an case from real life:

"Sure, four jet engines are less likely to neglect than one jet engine, merely what if all four engines were fabricated in the same manufacturing plant, and a mistake was introduced in all four by the aforementioned rogue employee?"

Myth 4: The Ethereum network is resistant to attacks

Myth 4: The Ethereum network is resistant to attacks

Assault resistance works much better in systems based on the Proof of Stake (PoS) algorithm, rather than Proof of Work (Prisoner of war), which the entire Ethereum blockchain operates on. This is i of the reasons why the Ethereum foundation is switching to PoS this year.

The fact that Ethereum is vulnerable to attacks became known in September 2022, when a series of Distributed Denial of Service (DDoS) attacks led to a significant delay in the operation of the nodes.

That time, despite the release of a series of Geth updates including "What else should we rewrite?", "Come up at me Bro (1.4.fifteen)" and "Poolaid (v1.4.17)," the Ethereum developers failed to handle the DDoS attacks. The situation was supposed to exist remedied past the release of the several Ethereum Comeback Proposals (EIPs):

Some of the highlighted EIPs that describe the protocol changes implemented in this hard fork, include EIP 155: Replay assail protection which prevents transactions from i Ethereum chain from being re-broadcasted on an alternative chain; EIP 160: EXP that adjusts the price of 'EXP' opcode and so it balances with the computational complexity of the functioning; EIP 161: which makes it possible to remove a large number of empty accounts that were put in the land at very low price as a result of earlier DoS attacks; and EIP 170 for contract code size limit.

However, in early October 2022, the new Ropsten network underwent new attacks. Ironically, at that moment it was existence used for testing the new Ethereum Byzantium update code supposed to forestall DDoS attacks past means of increasing the gas costs of opcodes.

Myth 5: Pools collusion is impossible

Myth five: Pools bunco is impossible

No one seems to deal with the solo mining of Ether today – users combine into large and pocket-size mining pools. This special threat to decentralization is posed by larger ones, since they manage the capacities of all the miners connected to them.

For example, pool operators can include in the generated blocks but those transactions which they are interested in processing. Therefore, one of the goals of the modern mining which many pools have today is to provide the distributed generation of blocks.

In the current environment, 60 to 70 percentage of the total hashrate of the network belongs to just four or five of the nearly pop pools. This applies to almost whatsoever cryptocurrency where its complexity has already outgrown certain limits, making solo mining incommunicable. Every bit a result, puddle owners influence the policy of the network as a whole.

Myth 5: Pools collusion is impossible

Image source: Etherscan

Until recently, the risk of full centralization of mining seemed far and far-fetched. But in 2022, Dr. Loi Luu expressed the stance that the state of affairs is more dangerous than it seems to be, and decentralization measures should exist taken as soon as possible.

Myth 6: Wallet owners have private access to their funds

Myth six: Wallet owners accept private access to their funds

One of the features of cryptocurrencies is that no one can brand any transactions with the funds that do non belong to them. In most tokenized systems, this is done through the following scheme: each of the transactors should accept the ability to allow the performance to exist performed then that it can meet the requirements of the previous transactor. This implies having the right individual key and allows avoiding double transactions or theft.

Ethereum has a total-fledged version of smart contracts. A smart contract is a program executed one time the transaction starts. In addition, it is the main "building material" for the cosmos of whatsoever decentralized application (dApps).

The technology of smart contracts has many advantages in terms of security and convenience, with the exception of one crucial drawback. Holders of digital wallets can non be considered sole owners of their funds - the custodians are the contracts themselves, which contradicts the original principles of cryptocurrency.

Theoretically, a running contract can perform whatever actions without the user's permission. Though it's e'er possible to check the definiteness of deportment through the open source code, not anybody tin can do this. This problem could be solved by ways of creation and use of only one contract for auditing, but for the fourth dimension being nobody implemented it.

On May 18, the NEO platform reported that it collided with the vulnerability of smart contracts:

As information technology turned out, hackers could perform whatever actions with tokens - for example increasing or decreasing the displayed amount and burning coins - using only i parameter of the smart contract. Actually, the developers managed to calm downward the community by stating that the real state of the blockchain wasn't affected.

A similar situation happened to the OKEx exchange, which on April 25 suspended all ERC20 tokens deposits afterward the discovery of a new smart contract problems connected with the vulnerability of the batchOverflow parameter:

By exploiting the issues, attackers can generate an extremely big corporeality of tokens, and deposit them into a normal address. This makes many of the ERC20 tokens vulnerable to toll manipulations of the attackers.

Myth 7: Manipulating network settings is impossible

Myth 7: Manipulating network settings is impossible

In belatedly 2022, the CryptoKitties online game took more than than 13 percent of all Ethereum traffic, having received the championship of "Ethereum'south Killer App". Such popularity was brought to the DApp by the elementary and at the same time unordinary functionality of assuasive users to breed unlike virtual cats and get the offspring. The more than unique offspring is, the higher the reward is given to its owner. Characteristics are endless, and so each pet is dissimilar from the others.

Myth 7: Manipulating network settings is impossible

Image source: TheAtlas

But what's wrong with CryptoKitties and other applications of this kind? Showtime, the huge demand for cats increased the queue of transactions waiting for being included in the cake. At the aforementioned time, pet owners in pursuit of high priority paid several times higher commission. This increased the network fee for the rest of the network users, creating huge "traffic jams" of unprocessed transactions.

Secondly, the prices occured to be uncontrolled. If immediately after the app release i cat cost most $2 in ETH, just within a calendar month the price reached $10, and in two months – $25, with up to $113,000 paid for ane kitten. Isn't it a skilful manipulation?

The potential threat of such applications cannot be underestimated. Developers fully command both the game and running smart contracts. Cats are gradually growing in price, and each contract tin be suspended at whatsoever fourth dimension. According to developers, this is a security measure in the event of hacking 1 of the three management accounts owned by the team. Still, the holder of the main account cardinal is able to freeze the entire game and, consequently, all the users' accounts. Finally, the smart contract, responsible for the characteristics of the kittens, is immune to be modified by the developers and has a closed lawmaking.

Some users compare this game with a pyramid. A new zero-generation cat appears every 15 minutes, and its price equals the boilerplate cost of the concluding five cats sold plus a fifty per centum surcharge. The higher the generation is, the slower pets are reproduced. Cypher-generation kittens belonging to developers are the virtually expensive. By selling all produced animals, developers can earn an income of over 2.two mln ETH - and this amount doesn't include commission for every action like mating and selling.

It cannot exist said that the popularity of CryptoKitties paralyzed the Ethereum network, but definitely information technology made its operation much more than complicated, with prices getting expensive and transactions congesting the blockchain. Information technology is still unknown how this volition end, simply if the number of breeding-blazon applications volition grow, the decentralization of Ethereum may come under serious set on.

Myth or not?

Decentralization is an integral part of whatsoever cryptocurrency. Even so, the numerous flaws resurfacing as the Ethereum blockchain continues to be used in different atmospheric condition, confirm that the network is not 100 percent decentralized. At that place is however a lot of work to be done for elimination of centralizing factors. The near difficult part of this would be creating incentive conditions for those who build the decentralization - miners and validators. One of such highly anticipated updates is Casper, which is scheduled for the summer-autumn of this year.

Is decentralization is but a myth or are inevitable changes necessary? Information technology is not a surprise that Cornell professor Emin Gün Sirer compared it to unicorns - they are cute, everyone would like to believe in them, merely logic does not allow.