We have been conducting a longitudinal study of the state of cryptocurrency networks, including Bitcoin and Ethereum. We have just made public our results from our study spanning 2015 to 2017, in a peer-reviewed paper paper wallet bitcoin to be presented at the upcoming Financial Cryptography and Data Security conference in February .
Here are some highlights from our findings. Bitcoin Underutilizes Its Network Bitcoin nodes generally have higher bandwidth allocated to them than Ethereum. Compared to our previous study in 2016, we see that the median bandwidth for a Bitcoin node has increased by a factor of 1. The typical Bitcoin node has much more bandwidth available to it than it did before. Higher allocated bandwidth indicates that the maximum blocksize can be increased without impacting orphan rates, which in turn affect decentralization. If people were happy about the level of decentralization in 2016, they should be able to increase the block size by 1.
7x to clear almost twice as many transactions per second while maintaining the same level of decentralization. Some people argue that increasing the maximum block size would also prohibitively increase CPU and disk requirements. Yet these costs were trivial in the first place, especially compared to today’s transaction fees, and have come down drastically. To date, we have seen no sound, quantitative arguments for any specific value of the maximum block size in Bitcoin. Arguments on this topic have consisted of vague, technical-sounding-yet-technically-unjustified argumentation, bereft of scientific justification. The dissonance between the technical-soundiness of the arguments and the actual technical facts on the ground is disconcerting for a technological endeavor . Ethereum is Better Distributed Than Bitcoin Compared to Ethereum, Bitcoin nodes tend to be more clustered together, both in terms of network latency as well as geographically.
Put another way, there are more Ethereum nodes, and they are better spread out around the world. That indicates that the full node distribution for Ethereum is much more decentralized. Part of the reason for this is that a much higher percentage of Bitcoin nodes reside in datacenters. Nodes that reside in datacenters may indicate an increased level of corporatization. In contrast, Ethereum nodes tend to be located on a wider variety of autonomous systems. The entire blockchain for both systems is determined by fewer than 20 mining entities .
While traditional Byzantine quorum systems operate in a different model than Bitcoin and Ethereum, a Byzantine quorum system with 20 nodes would be more decentralized than Bitcoin or Ethereum with significantly fewer resource costs. Thus, we see that more research is needed in this area to develop permissionless consensus protocols that are also energy efficient. Ethereum Wastes Mining Effort That Can Be Put To Better Use Ethereum has a much higher uncle rate than Bitcoin’s pruned block rate. This is by design, as Ethereum operates its network closer to its physical limits and achieves higher throughput. As a result, however, less of Ethereum’s hash power goes towards sequencing transactions than Bitcoin’s.