Ricardian Contracts Inventor says DPOS More Decentralized than Ethereum and Bitcoin Mining

Ian Grigg, the inventor of Ricardian Contracts, says Delegated Proof of Stake (DPOS) is 3x more decentralized than Ethereum and Bitcoin.

Ian Grigg, the inventor of Ricardian Contracts, says Delegated Proof of Stake (DPOS) is 3x more decentralized than Ethereum and Bitcoin mining. The distribution of mining on Bitcoin and Ethereum is highly concentrated, compared to block producers elected in a DPOS system. The encumbrance of mining resources makes mining inflexible to contrived attacks by countries. DPOS block producers rely on servers which are easier to move.

China's prohibition of ICOs followed by a clampdown on exchanges resurfaced the issue of government attacks on cryptocurrencies. Rumors from the mainland suggested miners too would be forced to shut down. Over 60% of Bitcoin's mining network, made up of mostly Chinese mining pools is still running, for now. 

A blog post by Ian on Steemit read:

Can they [Chinese Government] shut down the mining? Probably, and too much larger extent than the other governments. The reasons are twofold - censorship is a normal part of life there, and the regulations are much stricter 

China's blanket ban on cryptocurrencies and future forms of coercion pose a real threat. The centralization of Bitcoin and Ethereum mining is a bigger problem than both communities care to admit.

How decentralized are they? 

A simple pie chart of Bitcoin shows 80% of its Proof-of-Work based mining network. 5 of the largest mining pools control 56.8% of the network's hashing power. F2Pool, BTCC, ViaBTC, AntPool, and BTC.top are all based out of China.

The energy-intensive mining process makes great business sense with subsidies. So hashing power tends to the cheapest sources. Some of the largest European mining centers harness cheap hydropower from the cooler Nordic lands. Antpool leverages low-cost, abundant coal-powered energy from the failed coal mines of Ordos, Inner Mongolia. Venezuela's socialist regime heavily subsidizes mining costs for clandestine Bitcoin enthusiasts escaping hyperinflation.

Bitcoin and Ethereum have succumbed to economies of scale.

Ethereum mining distribution is worse with 5 mining pools control over 70% of the total hashing power of the network.

Blockchains Adopt Delegated Proof of Stake (DPOS)

Ethereum is now taking steps to switch its consensus mechanism to a proof-of-stake system (POS). POS systems are secured by stakes - owners of coins or shares or tokens - who have a direct financial interest in mitigating attacks. Peercoin and NXT use variants of POS for their networks. Casper, Ethereum's blend proof-of-stake is not expected to materialize until the summer of 2018.

In the meantime, Delegated Proof of Stake has stepped up as an alternative. DPOS is used in blockchain projects like Bitshares, Lisk, NEO, Ark, Tezos, and EOS.

Owners of stakes in a DPOS system take part in a continual voting process to elect a set number of block producers known as witnesses. 1 of the witnesses is randomly selected by the group or producer to confirm a block per period. Block producers effectively play the role of miners but without all the overheads. All they need is bandwidth and storage capacity.

Ian says the lightness of this system is better suited to respond to external attacks quickly. If a hostile government were to act against one block producer, stakes would vote out the weak link and pick a replacement from a waiting list of block producers.

Dan Larimer, the inventor of DPOS and CTO at Block.one said:

My research shows 21 block producers are ideal and far more decentralized than mining pools.

Block.one is building software for EOS, a platform that will compete with Ethereum for decentralized applications when it launches in July 2018. Sources close to the project expect EOS to introduce a third iteration of DPOS technology dubbed DPOS3.

Is the cost of Bitcoin and Ethereum mining still worth its cost?