Welcome to this weeks Just The Metrics

Hello Crypto-Community,

here we are again - your Just The Metrics Newsletter.

Starting today with the great words of Peter Lynch:

Having said that you know what you will find here:

the latest updates from the Cryptoverse, Crypto Metrics, L1 Comparisons, and all about Cardano.

Here's what we got this week:

1. Updates from Cardano

• The Edinburgh Decentralization Index @ Cardano

• Status Updates: Cardano Vasil Hard Fork Combinator

3. Diving into Just the Metrics

• The L1-Assessment-Framework applied to Solana

Ok, let's dig in!

Status Update on Cardano's Vasil Hard Fork Combinator

Here is Cardano's mid-month development update, providing insights into the status quo of the Vasil Hard Fork Combinator:

The new 1.35.3 node is released.

What does this node do: It fixes some important issues with previous versions of the node and provides some command-line interface (CLI) enhancements. The node provides full Vasil-era capabilities.

The release is looking good and over the next few weeks, there will be a close collaboration with exchanges, SPOs and DApp developers to ensure they are fully ready before the hard fork is.

Here are the Hard fork go-ahead indicators for SPOs, Exchanges, and dApps:

• SPOs are ready (75% upgrades to node)

• Exchanges are ready (25 exchanges with 80% liquidity ready)

• dApps are ready (top 10 dApps by TVL closely involved)

Currently, there are no severe bugs or issues outstanding, which are critical for the go-ahead. If no significant new issues are encountered, this will be the version with which the Vasil Hard Fork upgrade will be triggered on the mainnet.

Key takeaway: The prime goal is ensuring a safe and secure upgrade. The overall perception: we are well on track!

These are good prospects. We’ll keep you updated.

PS: Not to neglect other blockchain updates: the Ethereum Merge also seems to be going well. The test merge to the Goerli testnet went smoothly with minor bugs. Some say the merge could occur even earlier before September 19.

The Edinburgh Decentralization Index @ Cardano

Since the Newsletter is called Just The Metrics it is pretty obvious that we are focusing on fundamentals and essential metrics to assess L1 Blockchains.

Among security and scalability, decentralization is a very important indicator to assess L1s.

Here, the Edinburgh Decentralisation Index comes into play.

What is the Edinburgh Decentralisation Index:

The Edinburgh Decentralization Index (EDI) is an index developed by the University of Edinburgh to measure the level of decentralization of cryptocurrencies such as Bitcoin and Ethereum.

This is especially in times of constant discussion on which blockchain is ultimately the most decentralized a very important undertaking. There are already certain approaches and metrics available which indicate the degree of decentralization such as:

• Initial token distribution metrics

• Number of individual staked wallets

• Permissioned vs Permissionless Mode (Yes/No)

• Total number of validator nodes/relay nodes/stake pools

However, the Edinburgh Decentralized Index aims to add additional value to those singular metrics:

• It might not only identify the level of decentralization 

• But shall also provide benchmarking criteria for establishing and measuring the degree of decentralization

If this would come, it might lay the foundations for the blockchain space to move forward to realizing true decentralization.

Why do we need the Index?

Once the Index has been developed, the researchers will measure the decentralization of Bitcoin, Ethereum, Cardano, and other cryptocurrencies.

This will help tremendously in conducting and comparing L1 Blockchains' decentralization degree.

The exact calculation of EDI has not yet been disclosed. But we are curious and will keep you updated about any publications in this area.

Overall, seeing this backed by IOG and being involved in such an undertaking underpins the openness, transparency, and underlying principles when it comes to blockchain development

L1 Assessment Framework applied to Solana

Crypto is an emerging asset class of the 21st century. And when making investment decisions in this particular asset class, it is important not to base them on hype or ever-changing narratives.

Especially in the light of recent events, it becomes more & more evident that fundamental and metrics-based decision-making is key for a profound project assessment.

So here is the Blockchain Trilemma as Assessment Framework

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

• Security

• Scalability &

• Decentralization

General Decentralization Metrics:

Initial Token Distribution:

Solana has a very centralized initial token distribution. When comparing Solana to other Layer 1 chains like Ethereum and Cardano, the amount of tokens held by insiders is high.

Ethereum and Cardano distributed around 80% of their tokens through a public sale. Whereas Solana insiders are holding between 15% and 17% of the total supply and almost 50% of the initial token distribution.

The number of individual staked wallets & staking ratio:

• There is no exact information available for the number of individual staked wallets for Solana.

• Solana has a staking ratio of 75.83%, which is high.

• But some assessments suggest that 0.04% of all Solana wallets account for 88% of all SOL in circulation. This explains the high staking ratio as well as the centralization of the token distribution. (Source)

Permissioned vs Permissionless Node (Yes/No):

• Solana is a permissionless blockchain protocol

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

• As of 14.08.2022, Solana has 1818 validator nodes. Which is a relatively high number.

Factors Enabling Decentralization:

Size of a full node: 

• Solana ledger grows at a rate of 2TB per year, which is archived to Arweave. Validators just store 2 days worth of history (Source).

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

• CPU: 

  • 12 cores / 24 threads, or more

  • 2.8GHz, or faster

• RAM: 

  • 128GB, or more.

  • Motherboard with 256GB capacity suggested

• Disk:

  • PCIe Gen3 x4 NVME SSD, or better.

  • Accounts: 500GB, or larger. High TBW (Total Bytes Written).

  • Ledger: 1TB or larger. High TBW suggested.

  • OS: (Optional) 500GB, or larger (Source)

Solana relies on validator nodes with very high requirements to ensure the high performance of the blockchain. This significantly compromises the scope of decentralization of Solana.

General Security Metrics:

Cost of 51% attacks:

• For an attacker to control 51% of the Solana network, it will cost over USD 8.3 billion, not factoring in the price appreciation that will occur with a buyer trying to purchase that much SOL.

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

• Over the past 12 months, the Solana network has been down at least seven times, resulting in full or partial outages.

• Many of those outages were due to DDoS attacks. This means Solana is very much vulnerable to DoS & DDoS attacks (Source).

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

• Currently, Solana has a relay propagation network.

Factors Enabling Security:

Full Node/Partial Node Ratio:

• It's not possible to run just a Solana full node. You can only run a validator node, which has very high requirements. So very low Full node/Partial node ratio.

Client Diversity:

• According to the information available to the public, Solana has only one client, which is not optimal and client diversity is critical for the long-term viability of Solana.

General Scalability Metrics:

Transaction Throughput:

• Solana boasts a throughput of 65,000 transactions per second, which is around 10,000 times faster than Bitcoin.

• But most of the transaction throughput of Solana is consumed by vote transactions.

• So it's really hard to assess the real throughput. But it's safe to say that the throughput of Solana is orders of magnitude higher than blockchains like Cardano or Ethereum.

Transaction latency & finality time:

• Around 13 seconds

Active Layer 2s (rollups/state channels):

• No active L2s. Solana focuses only on L1 scalability.

Factors Enabling Scalability:

Status of data availability that enables rollups:

• Solana focuses only on L1 scalability. So the factors enabling L2 scalability are not relevant for Solana.

So what does now the overall verdict look like:

Decentralization: Low

Security: Low

Scalability: High

Solana is a highly scalable public blockchain. But Solana has a very centralized token distribution and has already been vulnerable to multiple DDoS attacks and other security bugs that brought down the chain to a halt.

Earlier this week Messari posted a tweet, calling the Solana DeFi ecosystem a "Mature ecosystem". But from a first principles point of view, the underlying blockchain should be decentralized and secure to enable a mature DeFi ecosystem.

In the current status Solana, is neither "mature" nor a "solid" L1. It can only be described as an experiment with high risk, in progress.

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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 research.