Welcome to this weeks Just The Metrics

Dear Crypto Enthusiast,

first of all: if you are still here: congrats and a BIG thank you!

The bear market is tough but since you are still engaging with the crypto space (by reading this 😉) you seem to be a real true crypto believer through thick and thin.

ok, then like every week:

here is Just The Metrics - your newsletter with the latest updates from the Cryptoverse, Crypto Metrics, L1 Comparisons, and all about Cardano.

This week we will dig into Aptos and answer the question:

Why decentralization determines the value of an L1 - The Aptos-Case.

You have probably heard about several new Layer 1 Blockchains sprouting from the soil like mushrooms (e.g. Sui, Lamina 1 next to Aptos). Mostly heavily backed with VC money. Is this a bad sign? And how much of the hype is real and might transform into real value?

Curious?

Ok, let's dig in!

Aptos

An Fundamental Analysis based on the Blockchain Trilemma

Just The Metrics

Your Weekly Newsletter explaining Layer 1 Blockchain Metrics.

The Background

The Team

• Aptos Co-founders are Mo Shaikh and Avery Ching who were part of the Facebook team that worked on Diem, the failed crypto stablecoin project

• Aptos Labs is the team behind the Aptos Network idea. Aptos Labs coordinates different teams of developers, engineers, strategists, and community builders.

The ICO

• In the case of Aptos we can not talk about an Initial Coin Offering but more about the initial private funding round, which involved mostly VC funding.

• Aptos raised $400m from VCs like FTX Ventures, Binance Labs, Coinbase Ventures, Jump Crypto, A16Z, Multicoin Capital, and more

• A $2b+ valuation in the private markets

The Consensus Mechanism

• Aptos uses HotStuff consensus protocol

• The consensus protocol happens over multiple views, optimistically in just one view.

• In each view, there’s a particular leader who is assigned to carry out the consensus.

• In Hotstuff, the way the participants exchange messages is the following: the leader accumulates messages and sends them back.

• HotStuff was also used as a Consensus Protocol behind Facebook's LibraBFT, the project from which Aptos evolved.

The Accounting Model

• Aptos uses an account model like Ethereum 

• Aptos’s account system fulfills with their multi-signature authentication and rotatable key two requirements, which are dev-friendly to consumer-facing applications.

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So, once we have understood the general setup, let's look at our well-known Assessment Framework comparing Aptos to Cardano and their performance in the 3 dimensions of the blockchain trilemma.

1. Decentralisation

2. Scalability

3. Security

So here is the Blockchain Trilemma as Assessment Framework

Let's take a look at certain metrics of Aptos that determine its degree of

• Security

• Scalability &

• Decentralization

General Decentralization Metrics:

Initial Token Distribution:

• Aptos had an initial Token distribution with 100% going towards insiders and the foundation.

• Compared to other Layer 1 chains like Ethereum and Cardano, the initial token allocation of Aptos is totally skewed towards insiders, where there is no public scale. For example, Ethereum and Cardano distributed around 80% of their tokens through a public sale.

• So overall, there is no fairness and decentralization in Aptos's initial token distribution.

The number of individual staked wallets & staking ratio:

• There is zero information regarding the number of wallets participating in the delegation.

• Aptos is a very new chain, where insiders own 98% of tokens. 4 days back there was an airdrop that distributed over 2 % of the initial token supply to the participants in the Aptos testnet. Around 100.000 wallets were eligible for the airdrop. This is the only information available about any community participation at all.

• Where as Cardano has more than 1.2 million unique wallets participating in the staking

This is just one more metric that shows the centralization of this blockchain.

This also tells you how easy it is to prop up 100 validators just to give a fake impression of decentralization.

Permissioned vs Permissionless Node (Yes/No):

• With 100% of Initial token distribution and 100% of validators belonging to the insiders of the Aptos blockchain.

• On top of that, you must sign an arbitration agreement in the Cayman Islands to be included in the validator set.

• So due to the centralization of the token distribution and permissioned validator set, no one from outside can run a validator for this PoS blockchain.

• In that case, the Aptos blockchain should be considered a permissioned network, where participation in the network layer is only possible with the permission of insiders.

The total number of active validator nodes/relay nodes/stake pools:

• No community-run validators on the network. One developer called out how all 101 network validators were hand-picked by Aptos. Apparently, you had to sign an arbitration agreement in the Cayman Islands to be included in the validator set

Factors Enabling Decentralization:

Size of a full node: 

• We could not find any sources pointing toward the current size of the blockchain.

Minimum hardware & connectivity requirements for running a validator node/relay nodes/stake pool:

• Storage: 2T SSD with at least 40K IOPS and 200MiB/s bandwidth

• Memory: 32GB RAM

• CPU: 8 cores, 16 threads 2.8GHz

• Networking bandwidth: 1Gbps

General Security Metrics:

Cost of 51% attacks:

• An attacker controlling 51% of the Aptos protocol will cost over $647 million. But this metric is irrelevant as long as the token distribution remains centralized.

Vulnerability to denial-of-service (DoS) and distributed denial-of-service (DDoS) attacks:

• Aptos seems to be less vulnerable to such attacks. But the security properties of a new chain can only be proven with the test of time.

Propagation network types (a peer-to-peer propagation network or a relay propagation)

• Aptos has a Peer-to-Peer propagation network.

Factors Enabling Security:

Full Node/Partial Node Ratio:

• Low, considering the relatively high requirements to run a full node. Most personal computers won't be able to host a full node of Aptos.

Client Diversity:

• Aptos has no client diversity.

General Scalability Metrics:

Transaction throughput:

• According to the documentation available, the Aptos blockchain is theoretically capable of around 160k transactions per second.

• The current network load is around 18 TPS.

Transaction latency & finality time:

• The documentations claim that Aptos offers sub-second finality for the transactions.

Active Layer 2s (rollups/state channels):

• There are no active Layer 2s on Aptos.

Factors Enabling Scalability:

Status of data availability that enables rollups:

• Currently, no details are available on this particular metric.

So what does now the overall verdict look like:

Decentralization: Low

Security: Unknown

Scalability: High

We believe that decentralization and permissionlessness are what separate public blockchains from centralized platforms.

But Aptos is an antithesis of the concept of decentralized public blockchains.

What Aptos has done regarding the initial token distribution and validator set is clear evidence that Aptos foundation and team use a permissioned chain using proof of stake for economics rather than security.

The blockchain landscape will see more of such "novel VC blockchains" launching. There are already many VC success stories like Solana and Avalanche, which gave investors a lot of profit. But it's important to analyze a public blockchain from a metric point of view, and we hope our newsletter helps you achieve that goal.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research4