The Solana Decentralization Debate
Writing helps me form an opinion on what I read. Ending research sprints with thoughtful questions since I don't find clear answers anyway. Today's 250 words written in 53 minutes.
A blockchain’s goal is to be secured by as many separate entities as possible. By having many parties validate a transaction, in crypto speak this is just adding blocks to the blockchain, the network is approved by the people using it. This is its fundamental use case— preventing an intermediary from making unilateral decisions that may not be in the users’ best interest.
Even though Solana’s technology is the best on the market with proof of history as a consensus mechanism, turbine for parallel smart contract processing, and most importantly a high tps optimal for mission-critical industries (healthcare, the military, financial transactions, gaming, and communications), it suffers a fatal flaw in the blockchain trilemma. There’s a widely held belief that decentralized networks can only provide two of three benefits at any given time with respect to decentralization, security, and scalability. Basically, Solana’s fast and secure without using any layer 2 scaling option, but only has 19 core validators.
Since these validators aren’t individual people who can have a gun held up to their heads but instead are pooled computational power from computers around the world, how does a network outage affect all validators? People seem to be hinging on the unexplained network outage a year ago as an argument against Solana.
Another important point is that the Solana super minority— the smallest number of validators that can control 33% of the total active stake— is 19 validators. This means since there are around 280m SOL tokens actively staked, if you take the 19 largest validators they control 33% of all the circulating tokens. If they all shut down the chain would stop. This of course is extremely unlikely since they're independent and there's no incentive for them to do so.
Another point of concern among crypto skeptics is that both PoS and PoW don’t democratize financial access. It’s just another way for wealthy people to benefit from the fee structures built into blockchain consensus mechanisms. Just like how PoW rewards nodes with the most computational power (creating a market for the latest ASICS and graphics cards), PoS rewards nodes with the most proportion of tokens staked. Circling back to the point I started with, this is a barrier to entry for everyday people to mine blocks. Does there exist a true peer2peer network that returns power to the people?