Blockchain’s Decentralization Is Doubtful, Report

The distributed ledger is the fundamental technology behind blockchains such as Bitcoin and Ethereum. The latest report, titled “Are Blockchains Decentralized?” of security research firm Trail of Bits, questions the thesis of decentralization as the long-standing notion of blockchain, arguing that it may be more centrally oriented than the crypto industry tends to believe.

Immutability subject to exploitation

The report, commissioned by the US government’s Defense Advanced Research Projects Agency (DARPA), casts doubt on immutability, which is often cited as a primary feature of distributed ledger technology, which allows cryptographic information to be immutable once documented on the network.

“Immutability can be broken not by exploiting cryptographic vulnerabilities, but instead by subverting the properties of a blockchain’s implementations, networks, and consensus protocols.”

The report found that expired Bitcoin nodes and unencrypted blockchain mining pools could enable various bad actors to “obtain excessive and centralized control over the network.”

Outdated nodes

Given that a large majority of Bitcoin nodes do not participate in mining to secure the network and expired nodes still run on the blockchain, the report claimed that it left the network vulnerable to vulnerabilities such as consensus failure that could lead to “a blockchain fork.”

Nodes are used to ensure the security of the blockchain and validate transactions in the chain. When they are compromised, the network is vulnerable to external attacks. The report noted that when outdated nodes continue to function, reducing the percentage of hashrate needed to perform a standard 51% attack, the network risks being compromised. It further explained:

“Furthermore, only the nodes operated by mining pools need to be degraded to carry out such an attack. For example, during the first half of 2021, the actual cost of a 51% attack on Bitcoin was closer to 49% of the hashrate.

Mining pools can also pose a threat to the security of every included node on the Bitcoin network, the report said. Referring to Bitcoin’s mining pool protocol Stratum as “unencrypted” and “unauthenticated”, the paper pointed out that once a third party within the network route is committed, transactions on the ledger can potentially be corrupted by external actors.

For a blockchain to be distributed optimally, the report said, there must be a so-called Sybil cost. However, there is currently no known way to implement Sybil costs in a permissionless blockchain like Bitcoin or Ethereum without using a centralized trusted third party (TTP).