Why Bitcoin and Ethereum may not be more decentralized than EOS?

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In the blockchain world, there are two major groups: one is a community led by Bitcoin and Ethereum, and the other is the community headed by EOS. These two groups have been arguing about which methodology will be the future and both parties believe that they have the future. The main point EOS has been arguing about is the 1 million TPS.

TPS is a performance indicator of blockchain technology. It refers to the number of transactions confirmed per second. The early bitcoin TPS number was only 7 per second, and the Ethereum had only a few tens. Meanwhile, EOS claimed to complete 1 million transactions per second. However, the testing shows that its actual TPS is 4000.

Why do different projects produce such different TPS? Fans of the Ethereum community believe that Ethereum and Bitcoin are completely decentralized, and the block generating process relies on all miners’ nodes in the whole network. On the other side, EOS is just a “super league chain + Token”. This alliance chain consists of 21 supernodes, and only these 21 supernodes participate in the blocks generating process.

EOS is not a complete decentralized network. In fact, it implements the particle centralized design to achieve better performance. This innovative design also inspired the subsequent improvements of Bitcoin and Ethereum; they both incorporate particle centralized designed into their network to improve the overall network performance. For example, Bitcoin’s lightning network, Ethereum’s sharding technology.

However, if we look at the number of DApp users of the public chain, EOS is apparently on the rise, while the Ethereum is on the decline. The main reason is that EOS can solve performance problems, and excellent performance is crucial for game development. Because game DApps attract most users, the number of EOS users is significantly larger than Ethereum. The picture below is a comparison of the number of DApps users in EOS and Ethereum.



As you can see from the picture, EOS’s 24-hour DApp users have exceeded the ETH by order of magnitude. From the data point of view, EOS has more users with the scenario of blockchain application. It indeed made significant progress in the public chain.

Bitcoin and Ethereum enthusiasts believe complete decentralization is the future of blockchain development and they think EOS is not fully decentralized. Here I’d like to ask one question: Are Ethereum and Bitcoin completely decentralized?

Ethereum and Bitcoin may look completely decentralized at first glance. However, the truth stands on the opposite. I’ll explain the reason in the following article.

Let me start with their principles. The blockchain public chain must solve one question: who can make the final decision. In the blockchain network, the one makes the final decision is the one generating the block. In the public blockchain network, no matter how many nodes are in the network, only one node can generate one block within a certain amount of time. In Ethereum and Bitcoin, blocks are generated at regular intervals. The blockchain itself is composed of a series of blocks, and each block records the hash of the previous block. (Only the first block has no hash of the previous block, also known as the Genesis Block). Each node has the right to make a permanent trace of all blocks and check their legitimacy. As long as one of the blocks does not match the record, the data produced after the unmatched block is problematic and must be discarded.

In Bitcoin and Ethereum, whoever produced the block gets a reward. If we think Bitcoin as a game, this game requests participants to solve a math problem every ten minutes. The node first solves the math problem gets the right to generate a block and wins the block reward accordingly, which means that the bitcoin generated by this block belongs to the node. The mining process is entirely guaranteed by cryptography. There is no law to follow when trying to solve the cryptographic question. The miner can only try the possible trillions of answers one by one. After the miners finally find the answer by luck, they get the right to generate a block and then pack the data into the block to get the bitcoin reward.

You may have found one problem here. For Bitcoin, it takes ten minutes to generate one block, and only one node can get the block reward. That says, Bitcoin can only generate up to 24x6=144 blocks per day, and only 144 out of hundreds of thousands of people in the network can get reward per day, which sounds like an unfair game. Ethereum has dramatically sped up the block generating process by introducing the Uncle Block mechanism. However, it only alleviates the problem instead of solving it on the root.

Giving miners rewards is essential to encourage the miners to participate in mining. So a centralized business organization called the mining pool comes out.


What is the mining pool? To explain the concept, let me tell you a story first. A long time ago, a young king proposed to a beautiful and intelligent princess lived in a neighboring country. The king loved math, so the princess asked him to find the proper divisor of a 17-digit number. If the king can find the proper divisor within one day, the princess will marry him.

The king immediately returned to his country and asked the best mathematician for advice. The great mathematician thought that there were 17 digits in this number, and the smallest proper divisor would not exceed nine digits. He proposed a solution: gave every citizen a number and asked them to calculate. Whoever finished the calculation should report immediately and received the bounty accordingly. So instead of one person calculating the number, hundreds and thousands of citizens are helping the king at the same time. In the end, the king solved the time-consuming and challenging problem within 24 hours by utilizing the power of the mass and married the princess happily.

Mining pool takes advantage of the mass as well. Small miners in the mining pool are similar to citizens in kings country; they provide computing resources to the network. A small miner is just a computing unit. It is not the same miner in the bitcoin network. The core responsibility of the mining pool is to assign small miners to conduct the calculations in an orderly manner.

The pool allocates a calculating range to each small miner. For example, Miner A calculates 1–10, then Miner B calculates 11–20, and so on. Some miner may calculate more numbers than the other because his mining rig is more powerful and calculates faster.

The structure ensures the mining pool win the rewards no matter which small miner finds the correct answer. Then the mining pool distributes reward to all its miners according to the actual calculation they conducted. The more numbers a small miner calculated, the higher the gain, and vice versa.

Therefore, the nodes involved in the calculation are not real miners. The mining pool is the real miner in the Bitcoin network, because the final reward for generating the block belongs to the mining pool. The mining pool also gains benefits for its work after distributing rewards to small miners. The mining pool and all small miners pre-agreed a ratio of the draw and the mining pool extract some percentage of revenue from the block reward. We can conclude that the mining pool is both a centralized organization and a commercial organization.

Besides, to improve the possibility of successful mining through the parallel calculation method of the mining pool, small miners are also trying to improve the computing power of a stand-alone machine. They upgraded from the initial CPU mining to GPU mining and then to ASIC professional mining rig mining (Bitmain is the largest manufacturer of ASIC professional mining rig). Professional mining rig upgrade happened once in a while, and the performance of each new-generation mining rig improved dramatically. The performance of the new mining rig is often ten times higher than that of the old generation. Because the power ratio was too small, CPUs, GPUs, and old-fashioned mining rigs were hard to win in such a machine upgrade battle.

As a result, whoever owns the most advanced machines can get the most benefits. Advanced machines are often in the hands of professional mining rig manufacturers like Bitmain which later built mining pools and Cloud Mining.

What is Cloud Mining? The Cloud Mining is the organization that hosts the mining rigs. The small miners directly get mining rewards without managing the mining rig themselves when employing cloud mining. Small miners just need to pay the Cloud Mining management fees.


As I said before, the mining pool is the ultimate miner in the Bitcoin network, and small miners are just computing resources. The rapid iteration of the upgraded machine led the professional mining rig manufacturers to enter the mining pool. The calculations capacity differentiate large mining pools from small ones, and the gap between them is widening. The Bitcoin network only generates a limit number of blocks in a day, which means there are a limit number of rewards each day, and small mining pools only get a sheer of these rewards. When the small miners discovered that the money they get in the small mining pool was much less than in the large mining pool, they would migrate to the large ones. A vicious circle formed gradually. As a result, small mining pools will disappear and left only large pools, which then form an oligarchic mining industry.

So the mining pool is the real and the only miner. What’s even more frightening is that if the number of bitcoin and Ethereum mining pools are getting fewer and fewer, and the network becomes more and more oligopolistic even monopolized, a terrible 51% attack may occur. When one or a few of the mining pools account for more than 50% of the calculation resource, they can tamper with the new block and be the ruler.

In the end, only a small number of large mining pools will survive in the market. It’s possible that the number of mining pools left is fewer than the 21 supernodes of EOS.

On the other hand, EOS directly form 21 identified oligarch nodes regarding governance. These 21 supernodes are politically equal that produce blocks in turn, and they form a relatively centralized nodes group. However, the intense competition in the Bitcoin and Ethereum naturally lead them to oligopolies and even monopolies that eventually formed a disguised center on the economic level. The process is similar to what has happened in many industries. In fact, the complete decentralization pursued by Bitcoin and Ethereum did not really happen. It’s highly possible that Bitcoin and Ethereum will become even less decentralized than EOS.

I considered this issue when designing PPIO, a decentralized data storage and delivery platform for developers that value affordability, speed, and privacy.

You may wonder, will PPIO be completely decentralized or relatively decentralized? If the governance is completely decentralized, then will PPIO make the same mistakes as Bitcoin regarding economy?

I carefully analyzed the principles of Bitcoin, Ethereum and EOS, and borrowed some of EOS’s design concepts to ensure the performance and stability of the storage service without losing the notarization of the blockchain. So the three stages of the PPIO project were designed, from “weak center” to “decenter”. You can get more details from my two other articles 《PP.io Simply Explained in 1,2,3 — strong center, weak center, and decenter》 and 《Why did I choose to design PP.io in three stages in order for the project to take off?》

In the end, I think that only the project with real application scenario is the future of the blockchain.

Article author：Wayne Wong

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If you have an exchange about blockchain learning, you can contact me with [email protected]