How decentralized is Cardano?

[bertman]

A lot of friends talk about how decentralized and super secure the Bitcoin chain is and claim Power Of Work is superieur to Power Of Stake, etc…

I can’t help thinking about the fact that the Bitcoin hash power is largely controlled by 3 big players if i’m not mistaken. Trying to be objective but what if they decide to work together and do a 51% attack? Isn’t Cardano much more decentralized than Bitcoin having over 3000 pools and probably safer in this regard?

Also how does Cardano measure up against Solana concerning decentralisation?

[Zyroxa]

Yes you are correct. In terms of block production Cardano is in my opinion far superior than Bitcoin, Ethereum or any other of the peers. On Cardano you would need the biggest 30 entities to gather more than 51% of the block production as you can see in the picture below :

When it comes about governance, id say we do have a long way to go with Cardano but this isnt something new. It was always the roadmap that Voltaire has to be finished before we are fully “launched”. Right now major updates or treasury withdrawals are still made by the 3 founding entities via BFT-keys. And obviously this isnt really decentralized but as i said, this will be changed soon (hopefully) when CIP-1694 gets integrated.

[bertman]

Thanks for the info.

I watched this video the other day Link to video

James is a great and fair analyst, but I think some numbers are wrong?

Also isn’t it true a blockchain is probably less decentralized when the tps is high and fees are very low? At least to this current date.

[Terminada]

For the record, the video you linked was by James from “InvestAnswers”. And, he is sounding more and more angry towards Cardano over time. He can’t help but slip in some jibes every time he mentions Cardano.

The problem for him is that he doesn’t understand the technical differences regarding the various blockchain design choices. As he says himself, he focuses on numbers because he thinks you can analyse blockchains like stocks based on TVL, TPS, number of wallets, etc.

I like watching James’ “InvestAnswers” occasionally as it shows how mainstream is likely viewing the total crypto market. I think he is typical of Boomer - Gen X investors who have the most capital to invest. Real opportunity arises when you can spot where, how, and why, the market has been mispriced.

Ask yourself: Why has Cardano taken so many different design decisions?

• Extended UTxO
• smart contracts that are validation scripts
• other tokens are native assets rather than smart contracts maintaining their own separate ledgers (like on Ethereum)
• liquid staking without any need for slashing
• on-chain governance
• functional programming language
• …

In the blockchain world, it seems convenient for people to think that some single person can have a unique idea that solves the “Blockchain Trilemma”. Kind of like Anatoly Yakovenko’s proof of history dream epiphany. Maybe you can strike it lucky too and find the chain that hit gold and get in early before the rest of the market finds out.

Ask yourself: Were the Cardano design decisions taken by a couple of head strong developers that had an idea one day or did it come about through years and years of research involving a huge team of people? Was the process painful, hard? Are they swimming against the tide? Why did they even decide to use Haskell as a programming language?

Regarding TVL metrics, you might want to read about Cardano swaps. The readme document used to have this comment, which I agree with:

If Cardano-Swaps reaches mass adoption, won’t TVL on Cardano go down?
Yes. Yes it will. TVL is a silly metric. It is a measure of who can be most inefficient with DeFi capital.

Get your head around what Eigenlayer is trying to do on Ethereum and why. Is Eigenlayer’s solution, to leverage slashing, ideal? How capital efficient will the entire Cardano ecosystem be when it has more side chains, oracles, hydra, etc.? These are difficult questions and there is quite a bit of uncertainty still, but capital efficiency will be a key determinant eventually. How capital efficient is Bitcoin?

By the way, before you fall in love with Solana like James has, you might want to read this medium article by Justin Bons. Furthermore, if you think like most traditional investors that it is safest to invest in the “blue chip” Bitcoin stock, then you might want to read his other article.

[bertman]

Thanks for the detailed explanation Terminada.
Very interesting articles you linked here.

Don’t worry. I won’t fall in love with Solana . I have more trust in a robust and scientifically proven solution like Cardano.

[bertman]

James from “InvestAnswers” did it again. Now comparing Cardano to Solana
He is indeed getting more and more pulled into the Solana web.

Not even sure all his numbers are correct?
And also comparing TPS. Why not talk about accounting model compared to utxo.

Also comparing so called innovative Solana fundamentals but with more hacking risk and worse decentralization which he doesn’t seem to mention

Thoughts?

🌟Crypto Clash: ADA 🌑 vs SOL ☀️! Who will win?

[Terminada]

I don’t want to change anything in my previous post except to comment about James’ accusation that Charles Hoskinson said “choosing Haskell was a mistake”. That statement has been taken out of context.

My understanding of the decision to use Haskell goes something like this:

• The Haskell programming language has some big advantages in terms of correctly converting the mathematical proofs in the Ouroboros papers into code.
• The functional nature of Haskell fits well with the functional nature of the UTxO model.
• Unfortunately, Haskell did not have enough library development at the time IOG adopted it’s use and consequently IOG had to build a lot of the libraries.
• IOG did build a node in Rust but it had stability / correctness issues.

An advantage of Haskell, which I think is going to become much more important over time, is the ability to prove code correctness. As AI - Chat GPT becomes more capable, it is going to become more important to prove code correctness. Are TradFi people going to put $Trillions at risk in the Robbery Forrest where hackers exploit one programming bug after another?

Here is another advantage of Haskell, for Cardano, that I haven’t heard anyone talk about:
It is a precondition that any decentralised blockchain must have all it’s code published open source. This makes it easy for anyone to copy code. But Haskell provides somewhat of a moat for Cardano since IOG has secured a significant proportion of the expert Haskell developers on the planet. Furthermore, Cardano’s design is significantly different to most other blockchains. Therefore, it is not easy for other chains to adopt or steal Cardano’s design advantages.

Regarding all the Invest Answers “metrics” from the “IA Math Engine”: I love the way he says: “It’s just data. Don’t shoot the messenger.” I also find it interesting that he says: “what is also incredible about crypto is that people don’t look at fundamentals”.

OK, so let’s think about some fundamentals:

• What is crypto about?
• What is it for?
• What are it’s killer features?
• Why are you even considering investing your time or money in blockchain technology?

Also think about: “Who has control?” The meaning of “platform risk” and what effect this has on people committing to build components and build businesses. How many correctly programmed, non-hackable DEX’s do you need or want? How many correctly programmed lending platforms do you need? Is it better to have individual components built that are swap-able? I don’t think the choice of Haskell for the Plutus smart contract language is a significant barrier for truly expert programmers. And, average programmers might get replaced by ChatGPT soon. Furthermore, have you looked into “Marlowe”?

A centralised database is always going to have greater transaction speed, faster finality, more TPS, and lower fees, than a truly decentralised blockchain.

Everything that is happening on blockchains at present is just kindergarten experimentation. Everyone is just building out capabilities and testing ideas. My bank in Australia has currently blocked my ability to transfer my money to a crypto exchange. The last transaction I did was the SPO vote experiment a couple of months ago. None of this is real. It is all just proof of concept stuff.

The market is forward looking and can see value in blockchain technology. But, this value stems from what it provides, that a traditional centralised database managed by a TradFi company or Govt, cannot.
I don’t think James from InvestAnswers gets that. He still thinks of blockchains as direct competitors to VISA/Mastercard and consequently he measures them similarly. Cardano is seeking to be much more than just a competitor to VISA.

[Terminada]

This tweet explains why the design flaws in Solana will become more significant problems over time:

They are not trying to do good design. As the architect of Solana, Anatoly Yakovenko is obsessed with optimising the hardware speed.

Hardware speed, network speed, and data storage are very important considerations. All cause a centralising effect if allowed to be too high. Have you seen the specs for running a Solana validator? There is no way I could run even one. My hardware doesn’t have enough RAM, enough processor speed, enough cores, or enough network bandwith, or even enough data storage. Yet I am currently running 8 separate Cardano validators. In fact, I am running one on my wife’s computer in a virtual machine and she doesn’t even notice it.

These problems will snowball. Design is critical and everything is built upon it. Software projects spend 99% of their time and effort fixing bugs and addressing legacy design flaws and many cannot ever be properly fixed.

I listened to a podcast involving the Ethereum MEV expert, “Hasu”, some time ago. This podcast: https://youtu.be/pMhc3MHip5k

Hasu said the following:

"Systems that have very low latency in some cases can provide a better experience for users in terms of faster confirmations and market makers can update their bits faster so they can reflect the real cost of liquidity. However, low latency has this really pernicious downside in that it leads to a lot of geographical centralisation. In a low latency system you are always incentivised to co-locate.

However in the system that is trying to be decentralised and robust to any particular regime or regulation then that is almost a death blow.

My view has not changed. I don’t think you can build a system that is both decentralised and very low latency."

I thought that was incredibly perceptive and informative especially when coming from the guy that has made millions from building the MEV boost infrastructure on Ethereum that validators use to front-run users.

Solana is not focused on designing their system to be decentralised. They are focused on gaming metrics like TPS.

[bertman]

Thanks @Terminada for the detailed explanation. I’m learning a lot from you.

Funny you’re hosting a vm on your wife’s computer without her even noticing

In Belgium I didn’t had any trouble yet with cryto tranfers for my current bank.

I also strongly believe in the Cardano way. That’s why I’ve chosen to use Cardano. I checked Marlowe recently. Definitely a good system to build contracts.