Try Quests to earn NEARNEAR - 10. The Path to Decentralization
The Path to Decentralization
NEAR has expressed its goals to decentralize in 2023. Simply put: are these efforts working?
Create a stylish, refined dashboard that enables viewers to assess both individual validators on NEAR, and validation as a whole (bonus points if you find a way to enable parameters or dropdowns that display different validators).
As ever, you are welcome to draw on past/existing work that explores governance on NEAR, as long as you provide credit to your original sources.
Ensure your dashboard can answer the question: is NEAR becoming more decentralized, or less?
Note: make sure your dashboard can load within a few seconds! Submissions that take a while to load will not score as highly.
✨Introduction
A proof-of-stake (PoS) blockchain network relies on validators to validate and process transactions, maintain the integrity of the network, and participate in consensus mechanisms. They are elected by token holders, known as delegators, who choose to delegate their tokens to validators in order to help secure the network. Validators are rewarded for their service with transaction fees and a portion of the block reward, while delegators are typically rewarded with a portion of the rewards earned by the validator they have delegated their tokens to. Herfindahl-Hirschman Index (HHI), Gini coefficient and Lorenz curve are used to measure the decentralization of a PoS network. It's important to note that the responsibilities and rewards of validators and delegators may vary depending on the specific PoS blockchain network, and it's important to consider other factors and indicators as well to measure the decentralization.
The Nakamoto coefficient and Gini coefficient assess blockchain network decentralization.
In a proof-of-work (PoW) blockchain network, the Nakamoto coefficient (or "Nakamoto index") measures mining power concentration. The top miner's mining power is divided by the network's overall mining power. A Nakamoto coefficient of 1 indicates a fully centralized network where one miner controls all mining power, whereas 0 indicates a fully decentralized network where all miners share mining power.
The Gini coefficient measures income or wealth distribution. It measures population inequality. In a proof-of-stake (PoS) blockchain network, it measures validator control. Control distribution is represented by the Gini coefficient, which ranges from 0 to 1.
Both metrics have drawbacks, however the Nakamoto coefficient is more relevant for PoW networks and the Gini coefficient for PoS networks. Other metrics like the Herfindahl-Hirschman Index (HHI) could also be examined. The blockchain network's decentralization measurement also depends on other elements and metrics.
Wealth or income distributions are shown by the Lorenz curve. It is used to assess population inequality. In a proof-of-stake (PoS) blockchain network, it measures validator control.
The Lorenz curve compares the cumulative percentage of validators and control on the horizontal and vertical axes. A diagonal line from the bottom left to the top right of the graph would reflect a totally equal distribution of control, when validators and control are equal. A horizontal line down the x-axis shows a perfectly unequal distribution of control, where a few validators control a lot.
The region between the Lorenz curve and the diagonal line indicates validators' control inequality. Inequality increases with area between lines.
Method
I attempted to achieve an overview of staking metrics such as new stakers, total staked NEAR staked volume, total count of validators, and so on in the current dashboard.
Then I look at the top validators in terms of their volume.
I evaluated the Nakamto and Gini coefficients and the Lorenz curve to assess the decentralization, and after that I dealt with staking over time since 2022.
Finally, I set a parameter for you to insert your desired validator and examine their summary metrics over the time period you specify.
✍🏻 Conclusion
Based on the information provided, it appears that the Near protocol's staking ecosystem has been steadily growing over the past year. The number of active stake pools has increased, indicating a growing interest in the network, and the decline in the average size of NEAR stake pools suggests that more smaller pools are being created, leading to a more diverse and decentralized network. The distribution of staked NEAR volume among the top validators is relatively concentrated, with the top ten validators holding more than 80% of the total volume. This is an important consideration, as a high concentration of staked volume in a small number of validators can lead to a more centralized network. However, it is important to note that the Nakamoto coefficient, a metric used to measure the level of centralization in a blockchain network, has been consistently increasing over the past year, with a range of values between 6 and 9. This suggests that the network may be becoming more centralized over time. Overall, it is important to continue monitoring the staking metrics and trends on the Near protocol to ensure that the network remains decentralized and resilient.
Hey there 👋!
Firstly, I appreciate you sticking with it until the conclusion.
I'm Hamed, a civil engineering Ph.D.
student interested in data analysis.
I've made many similar dashboards and visualizations since I started at Flipside in January.
Please take a look at my various contact details and let me know what you think.
About:
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Author: HaM☰d
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Discord: 0xHaM☰d#8391
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Twitter: @arjmandi_hamed
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Email: h_arjmandi2012@yahoo.com
:mag_right: Findings:
As of graphs above, its observable that, the figment.poolv1.near is the top validator by the most staked NEAR (39.6M Ⓝ), although the aurora.poolv1.near is the top validator by the most user interaction and the most staking transactions count.
The chart on the left depicts the distribution of staked volume among the top ten validators and other validators over time, indicating that the top ten validators have received more than 80% of the volume.
:mag_right: Findings:
The data presented suggests that there is room for improvement in terms of decentralization on the NEAR network. The Nakamoto coefficient, which measures the number of validators that would need to collude to compromise the network, is relatively high, indicating a concentration of power among a small number of validators. This is further supported by the Lorenz curve and Gini coefficient, which show a relatively unequal distribution of staked volume among validators.
It's important to note that while these metrics can provide insight into the decentralization of a network, they do not necessarily reflect the actual difficulty of conducting an attack on the network. Other variables such as the resources and capital required for an attack would also need to be considered.
In conclusion, the data presented suggests that there is a need for improvement in terms of decentralization on the NEAR network. Based on the data provided, it appears that 8 validators or 33% of the entire staked amount, would be required to compromise the network. However, it's important to keep in mind that the actual difficulty of conducting an attack on the network would depend on various other factors as well.
According to the data presented, the Nakamoto coefficient of the virtual currency "Near" has been steadily rising over the past year, with values ranging from 6 to 9.
:hourglass_flowing_sand: Staking Metrics Over Time
- As of charts below, October & November, 2021, were the most volatile months for staking activities on NEAR protocol.
- Although the staking volume, unique active stakers and staking transactions count decreased since last quarter of 2021, but the validators increased over time.
:hourglass_flowing_sand:Selected Validator
The following visuals depict the average staked NEAR volume, stake transactions, and unique stakeholder counts over time.
and the PIE chart right shows the distribution of unique staker counts based on their stacked volume ranges.
As seen for the selected validator "astro-stakers.poolv1.near," the average volume increased smoothly, and 65% of Stakers volume is in ranges less than 50 NEAR.
:mag_right: Findings:
Total staked volume is 503M Ⓝ with 319 validators and 108.9 delegators.
Total new stakeholder numbers are approaching 116K, with a peak of 9.7K on October 2, 2021.
:hourglass_flowing_sand: The following table represents an overview of the top validators' staked volume that matches the NEAR nodes page.
