A team of Cornell researchers has publicly released a paper recently that challenges the notion that the two most popular cryptocurrencies, Bitcoin and Ethereum, currently provide decentralized financial systems.

Their findings are the result of a two-year study of quantitative measures of the behavior of cryptocurrencies and the blockchain technology on which they are built.

The paper, titled “Decentralization in Bitcoin and Ethereum Networks,” comes from the Cornell-based Initiative for Cryptocurrencies and Contracts, also known as IC3, and was led by Prof. Emim Gün Sirer, computer science and co-director of IC3. Working with Sirer were Prof. Robbert van Renesse, computer science, Prof. Ittay Eyal, electrical engineering, Technion-Israel Institute of Technology, Adem Efe Gencer, Ph.D. ’17, and Soumya Basu grad.

Basu told The Sun that although the technical details are complex, cryptocurrencies and blockchain are based on relatively simple concepts of agreement and trust.

“Blockchain is a new way of forming agreement,” he noted. “You have a bunch of different machines from all over the world and blockchain technology gets them to agree on a single source of truth.”

From 2015 to 2017, the research team tested out popular ideas about decentralization in cryptocurrencies. The major contribution of the research was quantifying this decentralization so that it can be better understood, Basu said in an interview with The Sun.

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“Really this concept of decentralization is not something that has this precise number. We can’t say, ‘Bitcoin is five decentralized and Ethereum is seven,’” he said.

Since there was no one clear number to use as a measure of decentralization, the research team created and tracked a variety of different metrics. Their efforts included tracking distances between participants or “nodes” in the system and looking at how many nodes were held in data centers versus, for example, personal computers.

Their finding, that Bitcoin and Ethereum are less decentralized than once thought, was not entirely surprising to those who work with cryptocurrencies.

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“I think the surprise was the degree to which things were a little bit more centralized than we were expecting, though we did expect to see systems that weren’t as decentralized as we would have hoped,” Basu said.

The hope, Basu explained, is that a truly decentralized cryptocurrency could create a more efficient financial system based on trust in a network of participants rather than trust in central institutions such as governments and banks.

“The way to build a currency on top of [blockchain technology] is that everyone can agree how much money everyone else has,” he said.

This currency is then gained by the process, called mining, of confirming transactions and thereby “providing security” for the system, he said. He later added that “the big game changer in cryptocurrencies is … you can trust the system as a whole.”

Basu contrasted the trust which underlies cryptocurrencies with the trust underlying traditional financial institutions.

With cryptocurrencies, “there is a general sentiment that you can do trade and everything without relying on a central authority,” while “if you look at the traditional financial system, there are a lot of fees associated with trust,” he said.

While cryptocurrencies have their own expenses, Basu explained that many see potential in cryptocurrencies like Bitcoin and Ethereum to create more secure, efficient and decentralized financial system.

The IC3 research team’s findings tie into efforts to find “alternative designs” that could make such a decentralized system a reality, according to Basu. He said that there are other proposals at Cornell and beyond that address some of the problems that they uncovered in their paper.

Basu was optimistic that if such efforts are successful, cryptocurrencies and blockchain technology could bring savings to average people by making things “faster and more efficient.”­

More broadly, he said he believes decentralized cryptocurrencies and blockchain can allow people to get around trust centers and create a “world that’s a little more open.”

The research team’s decision to make their paper publicly available online in January 2018 also reflects a value for openness.

“Our group cares about having people learn about these results,” Basu told The Sun. “I think there’s been a lot of good discussion over the paper and … I think that discussion wouldn’t have happened unless we took the step of releasing it.”

He reflected that this discussion represents an important element of all scientistic research.

“I think that’s really how science should be done, where it’s open, it’s accessible to everyone, and if you’re interested, you should be able to go look at any of the papers and see exactly what assumptions we made and exactly what our methodology was,” he said.