Hi, my name is Alexander Sosnovsky and here is a list of metrics that would help to evaluate how decentralized a project is:
I’ve chosen Cardano (ADA) as it is a suitable native coin for assessing decentralization due to its scientific approach, utilization of the Ouroboros consensus algorithm, layered architecture, and focus on decentralized governance.
I tried to include all the useful information that helps to measure the level of decentalization of cardano ada. I've even analized and compared ada with some tokens in one of the paragraphs.
Contributor Commit Activity: Assess the number of contributors actively involved in the development of Cardano's codebase, the percentage of commits made by top contributors, and overall commit activity on the GitHub repository.
Number of contributors: 41 Number of repos: 550 Number of commits: 24354 Number of commits by top 10 contributors: 17113, which is %70 of overall commit activity (I did not include Cardano ecosystem projects)
Number of Pull Requests: Evaluate the number of proposed changes or improvements submitted by external contributors to Cardano's codebase via pull requests.
Overall jumper of pull requests: 3511 Open pr: 76 Closed pr: 3435
I included the GitHub issue number as I was interested in it either.
Number of open issues: 247 Number of closed issues: 1538
Allocation/Distribution of Assets at Initial Launch: Examine how the ADA tokens were allocated and distributed during the project's initial launch, considering the fairness and inclusivity of the distribution mechanism.
During Cardano's initial launch, the distribution and allocation of ADA tokens were conducted in a manner that aimed to promote fairness and inclusivity. The distribution mechanism involved a combination of pre-sale, initial coin offering (ICO), and subsequent token sales. Here's an overview of how the ADA tokens were allocated and distributed:
Pre-Sale Allocation: Prior to the public launch, a pre-sale was conducted to distribute a portion of ADA tokens. The pre-sale involved selling tokens to a select group of investors, including strategic partners, early supporters, and institutional investors. The purpose of the pre-sale was to secure initial funding for the development of the Cardano project.
Initial Coin Offering (ICO): Following the pre-sale, an ICO was conducted to further distribute ADA tokens to the public. The ICO allowed individual participants to purchase ADA tokens by exchanging them for other cryptocurrencies, such as Bitcoin or Ethereum. The ICO was open to anyone interested in participating and aimed to ensure broad participation and community involvement.
Token Sales and Exchanges: After the initial launch, ADA tokens became available for trading on various cryptocurrency exchanges. These exchanges provided a platform for individuals to buy and sell ADA tokens, thereby facilitating further distribution. The availability of ADA on multiple exchanges allowed for wider access and increased liquidity for the token.
Profit Mechanism: Analyze the mechanisms through which profits or benefits are generated within the Cardano ecosystem, ensuring they are distributed fairly among participants and not concentrated in a few entities.
Within the Cardano ecosystem, profits or benefits are generated through the staking mechanism and the use of smart contracts. These mechanisms aim to ensure fair distribution among participants and avoid concentration in a few entities. Here's an analysis of how profits are generated and distributed in Cardano:
Staking Rewards: In Cardano's proof-of-stake (PoS) system, participants can stake their ADA tokens by delegating them to a stake pool. By doing so, they contribute to the security and operation of the network. Staking rewards are generated through the validation and block creation process. Participants who stake their ADA tokens and actively participate in the network's consensus protocol have the opportunity to earn staking rewards. The rewards are distributed in proportion to the amount of ADA staked by each participant. This mechanism encourages active participation and incentivizes stakeholders to act in the best interest of the network.
Stake Pool Operation: Stake pool operators play a crucial role in the Cardano ecosystem. They are responsible for maintaining the infrastructure and operations of the stake pool. Operators can earn profits by charging a fee on the rewards distributed to the participants who delegated their ADA to the pool. This fee is typically a small percentage and is agreed upon between the stake pool operator and the participants. By allowing multiple stake pool operators to exist, Cardano promotes competition and ensures that profits are not concentrated in a few entities but distributed among various pool operators.
Smart Contract Deployment: With the implementation of smart contract support in Cardano, participants have the opportunity to create and deploy their own smart contracts. Smart contracts can be used for various purposes, such as creating decentralized applications (dApps) or issuing non-fungible tokens (NFTs). Profits can be generated through the use of these smart contracts, such as transaction fees or revenue sharing mechanisms built into the contracts. The distribution of profits from smart contract usage depends on the specific terms and conditions defined within the contract itself. This allows for flexible and customizable profit-sharing arrangements among the participants involved.
By combining the staking mechanism with the deployment of smart contracts, Cardano aims to create an ecosystem where profits and benefits are distributed fairly among participants. Staking rewards provide incentives for active network participation, while stake pool operations and smart contract deployments offer opportunities for participants to earn profits based on their contributions and utilization of the network's resources.
Cost of 51% Attack: Estimate the cost required for an attacker to control more than 51% of the Cardano network's computing power, considering the security and decentralization of the network.
The cost required for an attacker to control more than 51% of the Cardano network's computing power is estimated to be over US$26 billion. This estimation takes into account the current price of ADA and assumes that the attacker would need to acquire 51% of the circulating supply of ADA, which is approximately 16,293,637,815 ADA.
It's important to note that this estimation does not factor in potential price appreciation that may occur if a buyer tries to purchase such a large amount of ADA, which would make the attack even more expensive. The cost of attacking the network would also increase as the network grows and the value of ADA appreciates.
Furthermore, Cardano's protocol has undergone a rigorous peer-reviewed process and follows high assurance code techniques similar to those used in building jet engines and NASA projects. This focus on code quality and security aims to minimize the risk of vulnerabilities and attacks.
Considering the security measures in place, the decentralized nature of the Cardano network, and the significant cost required for a 51% attack. Thus, it is relatively impossible for the Cardano network to experience such an attack.
Node Distribution: Evaluate the geographic distribution and number of active nodes within the Cardano network, promoting decentralization, and enhancing the network's resilience.
The geographic distribution and number of active nodes within the Cardano network play a crucial role in promoting decentralization and enhancing the network's resilience. Here's a brief summary of the analysis I did:
Geographic Distribution: The Cardano network has a significant presence in Europe and North America, with underrepresented regions such as Oceania, Africa, and South America having a relatively small representation. Concentration in a few dominant countries, particularly the United States and Germany, is observed, which can pose risks associated with localized issues, censorship, or geopolitical pressures.
Number of Active Nodes: Cardano has a diverse set of active nodes, with validators distributed across 64 countries. However, the network still experiences stake concentration in the United States and Germany. The presence of self-hosted validators is relatively higher in Cardano compared to other networks, providing some degree of decentralization.
Operational Decentralization: While Cardano shows room for improvement in operational decentralization, it performs relatively better than other networks analyzed (avalanche, Cardano, cosmos hub, Ethereum, aptos, near, Solana).
Decision-Making Process: Assess the governance mechanism of Cardano, including how decisions are made regarding protocol upgrades, parameter changes, and community governance. Look for active participation from multiple stakeholders and avoidance of undue influence from a single entity.
Cardano's governance mechanism is designed to ensure active participation from multiple stakeholders and prevent undue influence from a single entity. The involvement of the Cardano Foundation, IOHK, and EMURGO in overseeing different aspects of the ecosystem helps distribute decision-making authority.
The voting system in Cardano enables stakeholders to participate in the decision-making process. Stakeholders, who hold ADA, can engage in on-chain voting by creating proposals and casting votes directly on the blockchain. The voting power is proportional to the amount of ADA held, ensuring a democratic distribution of influence.
Off-chain voting complements the on-chain process by providing platforms for community discussions and engagement. Stakeholders can express their opinions, contribute ideas, and influence the development of Cardano through various communication channels.
The Cardano Improvement Proposal (CIP) process allows anyone to propose and discuss changes to the protocol. The proposals undergo community review, and if they gather sufficient support, they can be implemented through a protocol update. This open and transparent process ensures that decisions regarding protocol upgrades and parameter changes are made collectively and take into account the perspectives of the community.
By combining on-chain and off-chain voting, Cardano's governance model fosters decentralized decision-making while facilitating practical and efficient processes. The involvement of multiple stakeholders and the transparent nature of the governance mechanism contribute to the network's resilience and help maintain a healthy ecosystem.
Voting Mechanism: Evaluate the inclusivity and accessibility of the voting process for Cardano stakeholders, ensuring decision-making power is distributed among a broad range of participants.
The voting mechanism in Cardano aims to be inclusive and accessible, ensuring decision-making power is distributed among a broad range of stakeholders. The design of the voting process considers factors such as stakeholder representation, ease of participation, and transparency.
Stakeholder Representation: The voting power in Cardano is proportional to the amount of ADA held by stakeholders. This means that stakeholders with more ADA have a greater influence on the voting outcomes. While this ensures that those with a larger stake have a stronger say, it also allows smaller stakeholders to participate and have their voices heard. The proportional distribution of voting power helps prevent dominance by a small group of stakeholders.
ADA Ownership Accessibility: ADA, the native cryptocurrency of Cardano, is widely available and accessible to users. It can be easily obtained through various exchanges and wallets, allowing a diverse range of individuals and entities to become stakeholders and participate in the voting process. The accessibility of ADA ownership contributes to the inclusivity of the voting mechanism.
On-Chain Voting: The on-chain voting process in Cardano enables stakeholders to directly participate in decision-making. Stakeholders can create proposals and cast their votes on the blockchain. This eliminates barriers to entry and ensures that stakeholders have a direct impact on the governance of the network. The transparency and immutability of the blockchain also enhance the credibility and fairness of the voting process.
Off-Chain Engagement: In addition to on-chain voting, Cardano encourages off-chain engagement through various community forums and discussion platforms. These channels provide opportunities for stakeholders to express their opinions, discuss proposals, and influence decision-making. Off-chain engagement ensures that stakeholders who may not be directly involved in on-chain voting can still participate in the governance process.
Proposal Submission and Review: Cardano's Cardano Improvement Proposal (CIP) process allows anyone to submit proposals for consideration. This open submission process ensures that ideas and suggestions can come from a wide range of participants. The proposals are reviewed by the community and relevant stakeholders, providing a collaborative and inclusive environment for decision-making.
Level of Community Involvement: Measure the level of engagement, participation, and diversity within the Cardano community to assess the project's decentralization and inclusivity.
The Cardano community demonstrates a high level of engagement, participation, and diversity, contributing to the project's decentralization and inclusivity. The community's involvement is characterized by the following key aspects:
Strong Support: The Cardano community has shown unwavering support for the project, even before the introduction of smart contracts and NFTs. This support has laid a solid foundation for Cardano's growth and development.
Active Participation: Cardano enthusiasts actively engage in discussions, attend meetups, and contribute to community-driven projects. Their active participation helps shape the platform's development and fosters a sense of ownership and involvement among community members.
Knowledge Sharing: The community actively creates educational content, tutorials, and support channels to help newcomers understand and navigate the Cardano ecosystem. This knowledge-sharing culture creates a welcoming environment and facilitates the learning and growth of community members.
Governance Involvement: Cardano's governance model, Voltaire, promotes decentralized decision-making and encourages active community participation. Community members have the opportunity to influence the platform's future development and direction through voting and proposal processes.
Community-Driven Projects: The Cardano ecosystem witnesses numerous community-driven projects and initiatives, showcasing the creativity and resourcefulness of community members. These projects contribute to the growth of the platform and inspire further innovation.
Global Diversity: The Cardano community spans across the globe, attracting members from various geographical locations. This diversity brings together a wealth of perspectives, experiences, and ideas, creating an inclusive and vibrant ecosystem.
Collaboration and Teamwork: Collaboration and teamwork are integral to the Cardano community. Members work together to solve problems, develop new solutions, and support each other in their endeavors. This collaborative spirit strengthens the community and its collective efforts.
Positive Impact: The Cardano community is passionate about making a positive impact on society, particularly through financial inclusion and sustainable development. This shared vision drives community members to actively support projects and initiatives aligned with these values.
Social Media Activity: Assess Cardano's presence and activity on social media platforms, including engagement, followers, and community discussions, as an indicator of decentralized project involvement and a diverse user base.
Cardano has a significant presence and activity on various social media platforms, indicating a high level of decentralized project involvement and a diverse user base. Here's an assessment of Cardano's social media activity:
Twitter: Cardano has a robust presence on Twitter, with an official account (@Cardano) that has a large following. The account regularly shares updates, news, and announcements about the project, garnering significant engagement from the community. The Twitter community surrounding Cardano is highly active, with discussions, debates, and conversations happening around various aspects of the project.
Reddit: Cardano maintains an active presence on Reddit with a dedicated subreddit (/r/cardano). The subreddit has a large number of subscribers and features discussions, news, and community-generated content. The Cardano subreddit serves as a hub for community engagement, where users can share their thoughts, ask questions, and participate in discussions related to the project.
YouTube: Cardano has a strong presence on YouTube, with official channels like "Cardano" and "Input Output" regularly uploading content. These channels feature educational videos, interviews, updates, and tutorials related to Cardano. Additionally, there are many independent content creators and influencers who focus on Cardano, contributing to a diverse range of perspectives and discussions.
Telegram: Cardano has an active presence on Telegram, with various official and community-driven groups. These groups serve as platforms for community members to interact, share information, ask questions, and engage in discussions related to Cardano. Telegram provides a real-time communication channel for the Cardano community to connect and collaborate.
Discord: Cardano maintains an official Discord server where community members can join and engage with others interested in the project. The Discord server provides different channels for discussions, support, and collaboration, catering to various interests within the Cardano community.
Other Platforms: Cardano's presence extends to other social media platforms like Facebook, LinkedIn, Instagram, and TikTok, although to a lesser extent compared to Twitter, Reddit, YouTube, Telegram, and Discord. These platforms offer additional avenues for community members to connect, share content, and engage with Cardano-related discussions.
In summary, Cardano exhibits a strong social media presence with active engagement, a significant number of followers, and vibrant community discussions. The project's involvement on platforms such as Twitter, Reddit, YouTube, Telegram, Discord, and others indicates a decentralized project with a diverse user base actively participating in conversations, sharing knowledge, and contributing to the Cardano ecosystem.
Integration with Other Projects: Evaluate Cardano's ability to integrate and collaborate with other cryptocurrency projects and protocols, reflecting higher interoperability and independence from a single entity.
Cardano demonstrates its ability to integrate and collaborate with other cryptocurrency projects and protocols, showcasing higher interoperability and independence from a single entity. Here's an evaluation of Cardano's integration efforts:
E-commerce Integration Project: The sponsorship of an e-commerce integration project by the SHOP stake pool highlights Cardano's commitment to expanding its use cases. The project aims to enable clients and online stores to carry out purchases on the Cardano blockchain without commissions or transaction fees. By integrating with e-commerce platforms like Shopify and Magento, Cardano strives to foster adoption and create a seamless payment experience using the native token ADA and other tokens hosted on the Cardano blockchain.
Decentralization and Community Empowerment: Cardano's founder, Charles Hoskinson, has emphasized the decentralization of the protocol by moving specifications and codes into the ADA community. This move recognizes the community's efforts and aims to distribute decision-making power across the network. The ADA catalyst development program, known as Fund1, launched by Input Output Hong Kong (IOHK), further strengthens the governance capabilities of the Cardano network. It equips the community with the necessary tools to govern the network's treasury, promoting decentralized decision-making.
Collaboration and Handover: IOHK's commitment to hand over the ADA network to the community in 2021 showcases Cardano's dedication to long-term decentralization. By involving the community in the governance and decision-making processes, Cardano ensures that the network is not reliant on a single entity. Collaborative efforts between IOHK, stake pools like SHOP, and the broader Cardano community contribute to the development, integration, and expansion of the ecosystem.
Cardano's integration with the e-commerce project and its focus on decentralization through community involvement demonstrate its ability to collaborate with other projects and protocols. By actively engaging stakeholders and empowering the community, Cardano promotes interoperability, independence, and resilience in its blockchain ecosystem.
I actually thought it might not be enough, so I looked deeper at this and found some more overall metrics:
Initial Token Supply Distribution: This metric examines how the initial token supply was distributed among different stakeholders, including founders, team members, investors, and the community. A more decentralized distribution ensures a wider ownership base.
During the initial coin offering (ICO) or public sale, 31.10% of the total ADA supply was allocated to participants who purchased ADA tokens. 14.90% of the total ADA supply was allocated to the Cardano Foundation, a non-profit organization responsible for promoting and supporting the Cardano project. 13.30% of the total ADA supply was allocated to IOHK, the technology company responsible for the development and maintenance of the Cardano blockchain. 2.90% of the total ADA supply was allocated to EMURGO, a blockchain technology company focused on commercial adoption and integration of Cardano. The remaining ADA tokens were distributed to various stakeholders, including early contributors, project reserves, and future development.
Concentration of Token Holders: This metric analyzes the distribution of tokens among holders. A higher number of unique token holders indicates a more decentralized ownership structure, while a few large holders may suggest centralization of control.
The distribution of tokens among holders can provide insights into the concentration of ownership and the potential influence of large holders on the price and governance of a cryptocurrency like Cardano (ADA). Here is an analysis of Cardano's token distribution based on the information provided:
According to Finbold's report in December 2021, the largest 10% of Cardano whales at that time controlled over 31 billion ADA tokens, which accounted for 92% of the circulating supply. This indicates a relatively high concentration of tokens among some holders.
In 2022, data from CoinCarp showed that the top 10 coin holders controlled 6.71% of the ADA coin supply, while the top 100 holders owned 19.08%. This suggests a slight decrease in concentration compared to the previous report.
Additionally, Santiment's tweet mentioned that the largest whales were holding 46.6% of the total token supply, with a significant portion of these addresses owned by large exchanges. This indicates that exchanges and institutional entities play a notable role in ADA token ownership.
The initial token distribution of ADA involved allocating tokens to various stakeholders. Around 2.5 billion tokens were allocated to IOHK, the development company behind Cardano, while 2.1 billion tokens were given to EMURGO, an international blockchain development company. The Cardano Foundation received 648 million tokens for platform promotion and adoption efforts. The remaining 84% of ADA coins were allocated to other investors.
Mining/Consensus Algorithm: This metric evaluates the mining or consensus algorithm employed by the blockchain network. Algorithms that are resistant to centralization, such as proof-of-work (PoW) or proof-of-stake (PoS), contribute to a more decentralized network.
Cardano utilizes a proof-of-stake (PoS) consensus algorithm called Ouroboros, which is specifically designed to be more energy-efficient and resistant to centralization compared to proof-of-work (PoW) algorithms. Here are some key points about Cardano's PoS algorithm:
Ouroboros: Cardano's PoS algorithm, Ouroboros, was the first blockchain consensus protocol to be developed through peer-reviewed research. It ensures that the network participants agree on the history of the blockchain by reaching consensus based on the amount of stake (or value) held in the system.
Stake Pools: At the core of Ouroboros are stake pools, which are reliable server nodes run by stake pool operators. ADA holders can delegate their stake to these stake pools. Stake pools ensure that anyone can participate in the consensus protocol, regardless of technical expertise or availability to maintain a node. Stake pools combine the stake of multiple stakeholders to increase the chances of being selected to create new blocks.
Decentralization: The use of PoS and stake pools in Cardano's consensus algorithm promotes decentralization. Instead of relying on specialized hardware and high energy consumption, PoS allows participants to contribute to the network's security and governance by holding and staking their ADA tokens. This approach reduces the concentration of mining power and encourages broader participation.
Efficiency: Compared to PoW algorithms, PoS algorithms like Ouroboros are more energy-efficient because they don't require extensive computational work to solve complex mathematical problems. This reduces the environmental impact associated with mining and allows for faster block validation and transaction confirmation times.
Rewards and Incentives: In Cardano's PoS system, participants who hold and stake ADA tokens have the opportunity to be chosen as block creators based on their stake and a random selection process. Participants earn rewards in the form of transaction fees and additional ADA tokens for their contributions to maintaining the blockchain's security and functionality.
Number of Active Validators/Miners: This metric assesses the number of active validators or miners securing the blockchain network. A higher number indicates a more decentralized network with increased security against potential attacks.
In the case of Cardano, which utilizes a proof-of-stake (PoS) consensus algorithm, the concept of "validators" is more applicable than "miners" in a traditional proof-of-work (PoW) system. Validators are responsible for participating in the consensus process and securing the network by confirming and validating transactions.
Cardano's PoS algorithm, known as Ouroboros, involves many validators who collectively secure the network. However, the exact number of active validators on the Cardano network can vary over time as participants choose to delegate their stake to different stake pools or become active themselves as stake pool operators.
Cardano has thousands of active stake pools, each with its own set of validators. The number of active validators can change dynamically as new stake pools are created and existing pools attract or lose stakeholder delegations.
The distributed nature of the PoS algorithm in Cardano ensures that the network is secured by a wide range of participants, reducing the risk of a single entity gaining control over the consensus process. This decentralization enhances the network's security and resilience, as it requires a significant portion of the total stake in the system to be compromised for an attack to be successful.
Cardano (ADA) demonstrates a strong commitment to decentralization through its governance model, active community involvement, and inclusive approach. The platform promotes open participation, encourages community-driven initiatives, and values diverse perspectives. With a decentralized token supply distribution and numerous token holders, ADA ownership is spread across a broad base of participants. Thus, Cardano strives to create a decentralized ecosystem that fosters collaboration, resiliency, and inclusivity, positioning itself as a blockchain platform that prioritizes the principles of decentralization.
Thank you for your time, hope I got your interest. Waiting for your feedback!