Yesterday, at BTC Prague, Tethers CEO, Paolo Ardoino, stated that full decentralization belongs only to Bitcoin.

He stated:

Bitcoin is about certainty. Its like a clock that keeps ticking, keeps ticking forever. When it comes to the concept of unstoppable or decentralized products because everyone uses the term decentralized there is only Bitcoin.

He also stated that he is a big fan of the 1MB limit on Bitcoin blocks, and the fact that only one is mined every 10 minutes, because this way everyone can participate. Even in the poorest country, one can easily download a block and participate.

The reference was obviously to other blockchains, which have blocks that are also much larger and above all much faster, but in this way require the nodes to download large amounts of data in a short time, effectively excluding those who have slow Internet connections.

According to Ardoino, Bitcoin is the only cryptocurrency that is not truly centralized.

He said that Bitcoin is the only example of a currency governed solely by mathematics, and that it essentially cannot be modified. The other criptovalute instead have a more or less high degree of centralization.

For example, he referred to those groups of developers who meet every month to decide whether to launch a new version of the software, whether to change monetary policy, and who in fact continue to change things.

The reference is obviously to Ethereum, which unlike Bitcoin evolves (that is, changes).

The Bitcoin protocol is practically unchangeable, except rarely and with the consensus of the community. Instead, the Ethereum protocol changes relatively often, even several times a year, and the decision on what to change, and how, is made by a relatively small group of developers, and not by the entire user community.

Moreover, it is evident and undeniable that the Bitcoin protocol changes only rarely (on average once every about 4 years), that the changes are often just additions and not real modifications, and above all that its monetary policy has never been changed. At present, it is reasonable to imagine that no one in the world is truly capable of changing it.

Instead, for example, the Ethereum protocol changes almost every year, sometimes even with profound modifications such as the transition from Proof-of-Work to Proof-of-Stake, and with a monetary policy that has already been changed several times in its nine years of existence.

If you add to this that such decisions are made by a relatively small group of developers who meet every month, the picture that emerges is certainly one of a greater degree of centralization compared to Bitcoin.

Tether, for example, is a traditional centralized company that issues tokens on Ethereum and on other blockchains.

To tell the truth, the first USDT tokens issued by Tether in 2014 were issued on Omni, a Bitcoin sidechain, but at that time the Ethereum blockchain didnt even exist, as it was created the following year.

In Tether know well what centralization is, just as any traditional company with shareholders and a CEO does.

Ethereum is actually a project carried out by a foundation, the Ethereum Foundation to be precise, which however is in all respects a centralized organization with a single executive director (Aya Miyaguchi).

Instead, behind Bitcoin there isnt even a single foundation, given that there are several centralized entities working on Bitcoin but none that actually have power over its protocol. For example, the same website bitcoin.org, often mistakenly considered as the official website of Bitcoin because it was originally created by Satoshi Nakamoto himself, actually now belongs to an independent group of contributors that does not represent Bitcoin itself.

In other words, in some ways, foundations like the Ethereum Foundation seem more similar to centralized entities like Tether than to the unorganized community of Bitcoin.

Of course, there are also several Bitcoin foundations, but there is no official one.

The speech is still different for many altcoin.

For example, behind various altcoins there are actually real companies, as in the case of USDT and Tether.

The difference lies in the fact that while it is Tether, and only Tether, that issues the USDT tokens, cryptocurrencies like BNB, SOL, XRP, TON, or ADA are actually issued by a not entirely centralized network, even though behind BSC, SOlana, Toncoin, and Cardano there are real companies that effectively manage the crypto project.

There are therefore different degrees of centralization, ranging from the maximum, represented for example by Tether, to the minimum, probably represented only by Bitcoin where it is close to zero.

There are crypto projects, such as Ethereum, that have a higher degree of centralization compared to Bitcoin, but lower than others, and there are others still, such as XRP, that have a significantly higher degree of centralization, although lower than Tether.

The highest degree of decentralization is probably only found in Bitcoin itself, behind which there is no single entity, subject, or organization that has any kind of centralized power through which it can manage its development or arbitrarily decide its evolution.

At most, there are large holders of BTC who can influence its price in the medium-short term by selling them.

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The decentralization exists only on Bitcoin for the CEO of Tether - The Cryptonomist

The recent hack on Ethereum layer-2 blockchain Linea, which led to the transfer of over $2.6 million in Ether (ETH) from the platform, underscores the urgent need for greater decentralization among layer-2 solutions, according to Alex Gluchowski, CEO of Matter Labs.

Linea, launched by ConsenSys, faced a security breach on June 2 when a hacker exploited Velocore, a decentralized exchange built on Linea. In response, Linea temporarily halted block production to mitigate further damage, highlighting centralized controls vulnerabilities.

The exploit involved moving 700 Ether (worth over $2.6 million) off Linea using a third-party bridge. Block production was paused between blocks 5081800 and 5081801.

The hack was first detected by Hexagate, which identified the stolen funds, vulnerable smart contracts, and exploiter addresses. Due to time zone differences, Linea could not immediately contact Velocore.

Gluchowski emphasized the necessity of decentralizing the sequencer, a critical component of layer-2 networks, stating, Decentralizing the sequencer isnt optional. Every serious L2 stack must race to do it first. Matter Labs, the company behind zkSync, is one of Lineas competitors.

Linea resumed block production, but halting the zkEVM blockchain highlighted the urgent need for decentralization, as noted by Gluchowski.

Declan Fox, Lineas product lead, acknowledged the importance of decentralization and assured that Linea is on track to achieve this more quickly than many of its peers. Given that many Rollup frameworks more than 2 years older than us are no further ahead, Im pretty delighted with our pace, Fox responded.

Despite the hack, Linea is pushing forward with its ambitious The Linea Voyage: Surge campaign, aiming to increase the total value locked (TVL) on the platform to $3 billion. Currently, around $1.2 billion is locked on Linea, according to L2BEAT.

Some critics have questioned the wisdom of setting such lofty goals after the hack. However, Linea defended its decision to halt the sequencer, stating it was a necessary step to protect users funds.

Also Read: Crypto Hacks Surge 666% & Losses $574.6 Million in May 2024

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Linea Exploit Reveals Decentralization Flaws in Ethereum L2s - Crypto Times

Web3 Foundation has announced a new grant awarded to PolkaPort East, aimed at furthering decentralization and bolstering community engagement within the Polkadot (DOT) ecosystem, as per the latest info shared with Finbold on June 4.

This Decentralized Futures grant is the first such grant to an organization in Asia.

PolkaPort East, an independent entity focused on investor relations and growth initiatives in Hong Kong and the Greater Bay Area, will utilize the grant to drive regional growth.

The initiative aims to promote Polkadots technology, fostering strategic investments and collaborations in the local ecosystem.

Max Rebol, co-founder of PolkaPort East and CEO of Harbour Industrial Capital, a venture capital fund centered on Polkadot, emphasized the strategic timing of PolkaPort Easts launch, stating:

The launch of PolkaPort East comes at a crucial moment for Polkadot. It represents a critical step towards increasing the networks decentralization while strengthening the ecosystems strategic position in Hong Kong.

Thibault Perrard, likewise a PolkaPort East co-founder, added:

With the support of the DF grant, PolkaPort East will be tapping into the thriving innovation hubs of Hong Kong and the Greater Bay Area while engaging and fostering relationships with local governments, global enterprises and capital allocators of the region.

Reflecting his colleagues sentiment, David Hawig, Director of Ecosystem at Web3 Foundation, likewise expressed enthusiasm for the PolkaPort East initiative:

The Web3 Foundation is thrilled to support the Polkaport East initiative through a Decentralized Futures grant. This project exemplifies our commitment to fostering decentralized access and innovation within the Polkadot ecosystem. We believe Polkaport East will play a pivotal role in enhancing connectivity and empowering the community in Hong Kong, driving forward the vision of a truly decentralized internet.

The initiative will attract participants across Asia, including developers, venture capitalists, and Web3 investors, and engage with university blockchain collectives, fintech companies, and local governments exploring blockchain technology.

Web3 Foundation launched the Decentralized Futures initiative in 2023 to support independent teams driving Polkadots success.

Inspired by Parity Technologies restructuring to focus solely on technical development, the program offers funding to both profit-driven and non-profit Polkadot-oriented organizations.

The program has dedicated an initial $20 million and 5 million DOT tokens to expand the Polkadot ecosystem, ensuring ongoing innovation.

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PolkaPort East launches in Hong Kong, supporting the decentralization of Polkadot ecosystem - Finbold - Finance in Bold

Staking is a crucial process in many blockchain networks that helps secure transactions and maintain the overall health of the system.

In traditional staking models, users entrust their assets to a third-party custodian, who manages the staking process on their behalf. This approach, known as custodial staking, has been the norm for quite some time. However, a new approach called non-custodial staking is gaining traction in the decentralized finance (DeFi) ecosystem, offering users greater control, security, and transparency. Non-custodial staking represents a paradigm shift in the way users interact with blockchain networks and participate in the validation and security processes, aligning with the core principles of decentralization and self-sovereignty that underpin the DeFi ecosystem.

What is Staking?

Staking involves committing or locking a portion of ones cryptocurrency holdings to participate in the validation and confirmation of transactions on a blockchain network. By doing so, stakers play a crucial role in maintaining the networks security and integrity. In return for their contributions, stakers receive rewards in the form of newly minted tokens or transaction fees. This incentive mechanism is a key component of many proof-of-stake (PoS) consensus algorithms, which are designed to be more energy-efficient and environmentally friendly compared to proof-of-work (PoW) systems like Bitcoin. PoS algorithms rely on stakers to validate transactions and create new blocks, rather than relying on energy-intensive mining processes. As such, staking has become an essential part of many blockchain networks, enabling users to participate in the networks operations while earning rewards for their contributions.

Custodial vs. Non-Custodial Staking

In custodial staking, users transfer their assets to a third-party platform or exchange, which then manages the staking process on their behalf. This approach offers convenience, as users do not need to worry about the technical aspects of staking. However, it also comes with significant risks. By relinquishing control of their assets to a custodian, users are exposed to the potential loss of their funds due to platform hacks, mismanagement, or other security breaches. Additionally, custodial staking often lacks transparency, as users have limited visibility into the staking processes and the management of their assets.

Non custodial staking, on the other hand, allows users to participate in staking without relinquishing control of their private keys or assets. Instead of relying on a third-party custodian, users interact directly with decentralized protocols and smart contracts deployed on blockchain networks. This approach ensures that users maintain full ownership and autonomy over their holdings throughout the staking process. By retaining control of their private keys, users significantly reduce the risk of losing their assets due to platform hacks or mismanagement. Furthermore, non-custodial staking promotes the core principles of decentralization and self-custody, aligning with the ethos of blockchain technology and the DeFi ecosystem.

How Non-Custodial Staking Works

Non-custodial staking involves interacting with decentralized protocols and smart contracts deployed on blockchain networks like Ethereum. These protocols are designed to facilitate staking processes in a decentralized and trustless manner, without the need for a centralized intermediary. Users connect their non-custodial wallets, which allow them to manage their private keys and digital assets, to these protocols. Once connected, users can delegate their stakes to validator nodes or liquidity pools without transferring asset ownership.

The staking process is governed by transparent, open-source code, ensuring that users can verify and audit the underlying mechanisms. This level of transparency is a key advantage of non-custodial staking, as it promotes trust and accountability within the ecosystem. By interacting directly with these decentralized protocols, users can participate in staking while maintaining full control over their assets.

To start non-custodial staking, users typically follow these steps:

1. Choose a non-custodial staking platform or protocol that supports the desired cryptocurrency or blockchain network.

2. Connect a compatible non-custodial wallet to the chosen platform or protocol.

3. Select the asset and amount to stake, based on the platforms requirements and the users holdings.

4. Delegate the stake to a validator node or liquidity pool, following the platforms specific instructions.

Throughout this process, users retain full control over their private keys and assets, ensuring that they can manage their stakes and rewards without relying on a third-party custodian.

Flexibility and Control

Another significant advantage of non-custodial staking is the flexibility and control it offers to users. Unlike custodial staking models, where users may face restrictions or delays in accessing their funds, non-custodial staking allows users to withdraw or transfer their staked assets at any time, subject to the specific protocols conditions.

This level of control and flexibility is particularly important in the dynamic and rapidly evolving DeFi ecosystem, where users may need to respond quickly to market conditions or take advantage of new opportunities. By maintaining full control over their assets, users can make informed decisions and adapt their strategies as needed without being constrained by the limitations of custodial staking platforms.

Potential for User Error

While non-custodial staking empowers users with greater control over their assets, it also introduces the potential for user error. Mistakes in transaction signing, loss of private keys, or interactions with malicious smart contracts can lead to the loss of staked assets.

Users must exercise caution and follow best practices for secure key management and transaction verification. This includes using hardware wallets, enabling multi-factor authentication, and thoroughly reviewing and understanding the protocols and smart contracts they interact with.

Market and Regulatory Risks

Like any cryptocurrency investment, non-custodial staking is subject to market volatility and fluctuations in asset value. The value of staked assets can fluctuate significantly, impacting the potential rewards and returns for stakers.

Additionally, the regulatory landscape surrounding cryptocurrencies and DeFi is still evolving, introducing potential uncertainties and risks. Changes in regulations or legal frameworks could impact the operations of non-custodial staking protocols or the broader DeFi ecosystem.

Users should stay informed about market conditions and regulatory developments, and carefully consider the associated risks before engaging in non-custodial staking activities.

Why Non-Custodial Staking Matters for DeFi

Non-custodial staking plays a crucial role in promoting the core principles of decentralization and user empowerment that underpin the DeFi ecosystem. By reducing reliance on centralized entities and custodians, non-custodial staking enhances the resilience and decentralization of blockchain networks.

In the traditional financial system, individuals often rely on intermediaries and centralized institutions to manage their assets and facilitate financial transactions. This centralization of power and control has led to issues such as lack of transparency, high fees, and limited access to financial services for many individuals and communities.

The DeFi ecosystem aims to address these challenges by creating a more open, transparent, and inclusive financial system built on decentralized technologies like blockchain. Non-custodial staking plays a crucial role in this vision by empowering users to take control of their financial assets and participate in the validation and security processes of blockchain networks without relying on intermediaries.

Promotes Decentralization

By reducing reliance on centralized entities and custodians, non-custodial staking enhances the resilience and decentralization of blockchain networks. When users stake their assets through non-custodial protocols, they contribute to the decentralization of the networks validation and consensus processes, making it more resistant to censorship, manipulation, or single points of failure.

This decentralization is a fundamental tenet of the DeFi ecosystem, as it aims to create a more equitable and inclusive financial system that is not controlled by a single entity or group of entities.

Encourages Innovation

The open and permissionless nature of non-custodial staking protocols fosters innovation and the development of new DeFi applications and services. Developers can build upon these protocols, creating novel financial products and expanding the DeFi ecosystem.

By enabling users to participate in staking and earn rewards without relying on centralized intermediaries, non-custodial staking protocols create new opportunities for individuals to generate passive income and participate in the growth of the DeFi ecosystem.

Additionally, the transparency and trustlessness of non-custodial staking protocols encourage experimentation and innovation, as developers can build upon these open and auditable systems, fostering the creation of new financial instruments and services that better meet the needs of users.

Future Trends and Predictions

As the DeFi space continues to evolve, non-custodial staking is expected to gain even more traction and adoption:

Increasing integration with broader DeFi ecosystems: Non-custodial staking protocols will become more tightly integrated with other DeFi applications and services, enabling users to seamlessly participate in various DeFi activities while maintaining self-custody of their assets.

Advances in user-friendly interfaces and security features: Efforts will be made to develop more intuitive and user-friendly interfaces for non-custodial staking, making it more accessible to a wider audience. Additionally, advancements in security features, such as improved key management solutions and smart contract auditing tools, will further enhance the safety and reliability of non-custodial staking.

Emergence of new staking models and incentive mechanisms: As the DeFi ecosystem continues to evolve, we may see the emergence of new staking models and incentive mechanisms that further enhance the potential rewards and benefits for participants. These innovations could include novel ways of distributing rewards, new types of staking assets, or the integration of staking with other DeFi primitives.

Regulatory clarity and adoption: As regulatory frameworks around cryptocurrencies and DeFi become more established, we may see increased adoption and mainstream acceptance of non-custodial staking solutions. Regulatory clarity could provide greater confidence and certainty for both users and developers, fostering further growth and innovation in this space.

Conclusion

Non-custodial staking represents a paradigm shift in the way users interact with blockchain networks and participate in the validation and security processes. By offering enhanced security, transparency, and control, non-custodial staking aligns with the core principles of decentralization and self-sovereignty that underpin the DeFi ecosystem.

As the DeFi space continues to grow and evolve, non-custodial staking will play an increasingly important role in empowering users, promoting decentralization, and fostering innovation. By enabling individuals to participate in the validation and security of blockchain networks without relying on centralized intermediaries, non-custodial staking has the potential to shape the future of finance in a more open, inclusive, and trustless manner.

However, it is important to acknowledge and address the challenges and risks associated with non-custodial staking, such as technical complexity, potential for user error, and market and regulatory uncertainties. Continued efforts to improve user education, develop user-friendly interfaces, and establish clear regulatory frameworks will be crucial in ensuring the widespread adoption and success of non-custodial staking solutions.

Ultimately, non-custodial staking represents a significant step towards realizing the vision of a decentralized and self-sovereign financial system, where individuals have greater control and autonomy over their assets and financial activities. As this approach continues to gain traction, it has the potential to empower users, foster innovation, and reshape the future of finance in a more equitable and inclusive manner.

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What is Non-Custodial Staking and Why It Matters for Decentralized Finance? - FinSMEs

Linea, a Layer 2 blockchain based on Ethereum, has recently reaffirmed its commitment to the complete decentralization of the network after deliberately suspending block production in response to a security exploit involving Velocore, a decentralized exchange operating on the platform.

The incident, which occurred on June 2, led to an unauthorized withdrawal of over 7 million dollars in ether, highlighting critical vulnerabilities and prompting Linea to take decisive measures to protect its community and digital assets.

On June 2nd, Velocore experienced a significant cyber attack that resulted in the theft of over 7 million dollars in ether. The hackers exploited a vulnerability in Velocores protocol, managing to drain the funds from the system.

This event has raised immediate concerns about the security of the entire Linea network, leading to the decision to temporarily suspend block production to assess the situation and implement the necessary countermeasures.

In response to the attack, Linea made the extraordinary decision to temporarily suspend block production. This move allowed developers to focus entirely on analyzing the exploit, identifying security flaws, and preventing further losses. While this suspension temporarily interrupted normal operations on the network, it represented a necessary step to ensure the security and integrity of the blockchain.

After the incident, Linea clarified that its main objective remains the complete decentralization of the network. This strategic direction was reiterated not only as a response to the specific incident with Velocore, but also as part of the long-term vision of the project.

Decentralization is seen as a key element to increase the resilience of the network, reducing the risks associated with centralized control points that can become targets of attacks.

Decentralizing a blockchain network brings numerous advantages. First of all, it increases the overall security of the system by distributing control and reducing vulnerability to single points of attack.

Furthermore, a decentralized network can ensure greater transparency and trust among users, as no single entity can manipulate or influence the operations of the blockchain.

In the context of Linea, decentralization also means greater participation from the community and stakeholders in the networks governance. This approach can lead to more balanced decisions that represent the interests of users, improving the equity and sustainability of the project in the long term.

Following the hacking of Velocore and the suspension of block production, Linea has announced a series of measures to accelerate the decentralization process. These include:

The incident with Velocore represented a critical moment for Linea, highlighting the challenges and vulnerabilities that even advanced blockchain networks can face. However, the proactive response of the project, with the suspension of block production and the reaffirmation of the decentralization plan, demonstrates a strong commitment to the security and integrity of the network.

In the long term, complete decentralization will not only improve the resilience of Linea, but also the trust and engagement of the community. This incident could prove to be a catalyst for a more robust and decentralized network, capable of facing future challenges with greater effectiveness and transparency.

Continued here:

The hacking of Velocore: a chronicle of the incident with Linea - The Cryptonomist