Strong system architecture is key to maintaining system dependability, where dependability is defined as a network with high levels of availability, reliability, maintainability, safety and security.
At the heart of a blockchain’s dependability is its ability to protect itself from external threats while maintaining uptime. Geographic dispersion is therefore a top consideration to counter the largest threat to dependability failures: a 51% attack.
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Taking a snapshot of global gold and bitcoin production gives insights into what a healthy Bitcoin mining market should look like. Both are political financial assets given their descriptors as stores of value and inflation hedges.
Geographically, gold production has settled into jurisdictions favorable to production.
Bitcoin has quickly followed suit. China’s ban of Bitcoin mining this summer being the latest example.
Comparing PoS and PoW
Emerging networks – particularly Ethereum 2.0’s proof-of-stake (PoS) network – muddy the geographic decentralization argument somewhat due to their reliance on internet connectivity over physical location.
Ethereum is the second largest protocol by market capitalization. And its often touted by developers and others as an alternative to Bitcoin. Ethereum’s desire to move to PoS – a block creation, propagation and settlement mechanism reliant on coin deposits over computation work – remains its major feature.
Core developers have issued developments in sequences, beginning with the Beacon Chain in December 2020. The fully functional PoS-based Ethereum is expected sometime this spring.
At first glance, it may seem Ethereum validators remain dangerously concentrated. Indeed, some 60% of Beacon Chain nodes are hosted in the US and 21% in Germany.
But geographic dispersion matters less for PoS systems for a few reasons:
1) PoS systems are ground to the "real economy" via capital and IP addresses, both of which are nominally simple to mask compared to a mining farm.
2) Beacon nodes are only part of the Eth 2.0 network. Validator nodes subscribe to Beacon nodes, meaning stake is likely more distributed than the above image represents.
While geographic decentralization is always a good goal to aim for, it's a weaker criticism of PoS networks. Rather, arguments against PoS should focus on other features of dependability such as security guarantees of the chain itself.
Thanks to Nic Carter for inspiring this article. Thanks to Miga Labs for insights into Eth 2.0’s validator set.
Updated: added information on the relatioship between Beacon Chain nodes and Validator nodes.