All is relative – This Decentralized Finance (DeFi) project based on Solana (SOL) claims that the blockchain is decentralized, contrary to the criticisms traditionally leveled at the network.
Decentralization validated for Solana? Not sure !
UnstoppableFinance defends the colors of its house, in a long article that the team published on its Medium. The Solana-based DeFi company puts forward a number of arguments, to demonstrate the relative decentralization of Solana, compared to that of its competitors.
Unstoppable Finance begins by addressing the issue of number of active validators, which would amount to almost 2,000 on Solana. The network would thus only be surpassed in this area by Ethereum (ETH).
A shared centralization problem
Most of Solana’s validators are located in the United States and Germany, and are hosted on AWS and Hetzner server farms. This high concentration of validators in two countries and on two platforms goes against the spirit of real decentralization, and makes the network vulnerable.
The establishment and application of any regulations hostile to cryptocurrencies in the United States or Germany could put the network in the red. The same worst-case scenario would occur, if one of the two cloud computing service platforms suffered outages, which would then cripple a large number of validators.
Although Unstoppable Finance mentions these points which constitute Solana’s weaknesses, the company relativizes by emphasizing that these issues are not blockchain specific. Ethereum and Avalanche (AVAX) are also confronted with these centralization phenomena.
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Distribution of tokens and ease of material
Unstoppable Finance is continuing its case, based on two other factors. The first concerns the Nakamoto coefficient. The value of this metric is positively correlated to the distribution of staked tokens on a blockchain, and therefore to the decentralization of the network. Solana’s Nakamoto coefficient is higher than blockchains such as Cosmos or Near Protocol.
The second factor to take into account to appreciate the relative decentralization of Solana concerns the cost of the validation equipment.
Although Unstoppable Finance recognizes that “Solana validators are serious machines” that are not “cheap”, the company recalls that the Solana Foundation has set up “a server rental program with partner data centers to solve this problem.
The definition of decentralization is becoming clearer over time, but still needs to be formalized, to have a common framework for reflection and action on this subject. These tags should make it possible to clarify the debates or to have a more constructive reading of the criticisms which call into question the effectiveness of decentralization in the web3.
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