Study Shows that Bitcoin and Ethereum Are "Very Centralized"

A study by Hacking, Distributed says that Bitcoin and Ethereum are "very centralized".

The peer-reviewed study, entitled "Decentralization in Bitcoin and Ethereum", is written according to information gathered between 2015- 2017 and is to be presented at the Financial Cryptography and Data Security conference in Curaçao in February.

The study states that the top four Bitcoin mining operations and top three of Ethereum control more than 50% of the world's Hash Rate Hash Rate A hash rate is the measure of a cryptocurrency miner’s performance and a key security metric. In the context of mining, the more hashing or computing power in a given network, the greater its security and its overall resistance to attackMining hashrate is a key security metric. The more hashing (computing) power in the network, the greater its security and its overall resistance to attack. Hash rate is also a measurement of the output of a device that is used to add transactions to a blockchain A hash rate is the measure of a cryptocurrency miner’s performance and a key security metric. In the context of mining, the more hashing or computing power in a given network, the greater its security and its overall resistance to attackMining hashrate is a key security metric. The more hashing (computing) power in the network, the greater its security and its overall resistance to attack. Hash rate is also a measurement of the output of a device that is used to add transactions to a blockchain Read this Term, and the entire Blockchain Blockchain Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Blockchain comprises a digital network of blocks with a comprehensive ledger of transactions made in a cryptocurrency such as Bitcoin or other altcoins.One of the signature features of blockchain is that it is maintained across more than one computer. The ledger can be public or private (permissioned.) In this sense, blockchain is immune to the manipulation of data making it not only open but verifiable. Because a blockchain is stored across a network of computers, it is very difficult to tampe Read this Term of both systems "is determined by fewer than 20 mining entities".

Ethereum is more decentralised than Bitcoin - the study found that 28% of Ethereum nodes can be identified as data centres, compared with 56% of Bitcoin's. In addition to the former's nodes being more spread out, it also has more of them.

Uncles and orphans

Regarding the block size of Bitcoin, a hot subject within the community which led to the creation of spin-off currency Bitcoin Cash, the researchers claim to have seen "no sound, quantitative arguments for any specific value of the maximum block size in Bitcoin." Nodes on the network have increased by a factor of 1.7 on average, meaning that block size could be increased without affecting orphan rates and without any substantial increase in hardware costs.

Orphans are valid blocks which do not make it on to the Bitcoin blockchain. They usually occur when two copies of the same block are mined at the same time.

Bitcoin's orphans are Ethereum's uncles. The Ethereum network gives out rewards for mining these blocks. This has the advantage of decreasing the tendency toward centralisation, but as these blocks do not contribute to the main chain, they don't contribute to the system. The study says that this "wastes mining effort".

On the other hand, this makes the Ethereum system fairer than that of Blockchain. Because there are more blocks that can be worked on, smaller miners are more likely to be able to profit from the operation. Bitcoin blocks are far more infrequent, and orphaned blocks give no reward.