Where Polkadot is a Leader in the Blockchain Ecosystem

I wanted to create a thread where we as a community can collect places where Polkadot is identified to be a leader in the Blockchain ecosystem.

Of course, not every metric out there will place Polkadot at the top of every category, but I think it would be good to collect the places where we have ranked highly among our peers in the blockchain industry.

I think as a rule for posting content here:

  • The ranking must be reasonably unbiased
  • Links to the source material, and how the ranking was determined
  • No negative talk about others and their rankings

Discussions on these metrics is welcome!


What sparked me to start this post is the following two metrics I have seen which place Polkadot at (or near) the top of developers building and security provided by the network.

Polkadot is #2 is most active developers, behind Ethereum

Unfortunately I do not have access to the official report which contained this graph, as I believe it behind a paywall, but you can find the source here: https://twitter.com/Polkadot/status/1577016988697706496

The original data came from: GitHub - electric-capital/crypto-ecosystems: A taxonomy for open source cryptocurrency, blockchain, and decentralized ecosystems

Polkadot has #2 highest Nakamoto Coefficient, behind Bitcoin

The Nakamoto Coefficient represents the number of validators or nodes that must agree to affect the blockchain and prevent it from functioning correctly. A bigger value relative to the total number of validators, the lower the risk of something like this happening and, therefore, the more decentralized the network. (source)

Source from Ultimate by Unstoppable Finance

Another Graph from Messari:

Source

Here is a table including Ethereum:

Source: https://twitter.com/theEARLY3IRD/status/1577738439012802561

Bitcoin is not in that chart, but using other sources, we can say it is clearly a leader in the thousands.

Another source of data points (doesn’t include Polkadot): https://nakaflow.io/


What are some other places that Polkadot is leading the competition?

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Let’s also add that Polkadot has been recognized as the greenest blockchain protocol among its peers as determined in the report by the CCRI

Figure 4: Yearly electricity consumption for Bitcoin, Ethereum, Proof of Stake networks Polkadot, Tezos, Avalanche, Algorand, Cardano and Solana, and an average US household in kWh. Logarithmic scale.

Source

Messari came to the same conclusion in one of their reports:

Source

This is particularly impressive given the metric above that Polkadot also provides the highest Nakamoto Coefficient by a large margin compared to those peers, so extremely high security / decentralization at low energy requirements.

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A few protocols in the blockchain ecosystem have also “discovered” Wasm to be a flexible VM to execute their state transition functions, but none have come close to the efficiency of execution provided by Polkadot. Given the importance of Wasm to the Substrate blockchain development framework, a lot of work has been done to optimize the performance of Wasm execution within the Polkadot ecosystem, and it shows:

A report by Pendulum showed that the execution speed of Wasm smart contracts using Substrate’s Contracts Pallet is significantly faster than their EVM counterparts, and the execution of Pallets themselves is off the charts (literally):

(smaller is better)

Wasm is the Performance Power House

We measured the execution time of a variety of benchmark projects. The complete code is available on GitHub. In this article we will only focus on two projects:

  • Odd Numbers: the smart contract takes one argument n and will compute the product of the first n odd numbers (modulo 2**64).
  • SHA-512: the smart contract takes two arguments n and i and will iterate SHA-512 i times on input n, i.e., it will compute SHA(SHA(…(n)…)).

While these are not smart contracts that you will find in the wild, they are useful to measure raw performance. The performance is shown in the bar chart below. Note that the execution time of the pallet is not visible because it is so low (about 1 millisecond only).

Source

This sheds light on just one aspect toward why many teams have decided to create their dApps using ink! or scale their existing dApps onto an application-specific parachain.

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These stats are really great! Especially the developer activity and WASM performance. But I would like to push back on one thing. Nakamoto Coefficient may be an insufficient metric for determining Polkadot decentralization.

The reason has to do with an element of Polkadot staking rewards Kian pointed out at the Cambridge 2022 Academy. Polkadot hard caps the rewards to be garnered by any single validator, thus incentivizing single entities such as exchanges to run many validators rather than a single heavily staked one. This may result in validator clusters which create centralization the Nakamoto Coefficient doesn’t account for.

I would be very interested to see how Polkadot decentralization stacks up against other protocols with some “Nakamoto Coefficient 2.0” metric that tracks the number of validator clusters that must agree to interfere with a blockchain. I realize that would be a much harder stat to get an objective read on. For the record, it’s awesome that Polkadot does so well with the vanilla Nakamoto Coefficient!

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Rob Habermeier points out another category in which Polkadot is the best here: Polkadot: Blockspace over Blockchains | rob.tech

That is architecture for flexible allocation of block space to meet both consistent and intermittent demand! Polkadot functions with the notion of “execution cores” and variable ways to allocate their services such as parachain auctions and parathread block purchase. The promise of this flexibility isn’t fully realized at the moment, but parathreads are coming soon. Also Polkadot has the modularity to insert other market structures for block space when desirable. This could be a huge design space that most blockchains simply aren’t set up to capture.

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I would expect that these reports already do these kind of “brain work” to summarize validators that are belonging to the same entity. Otherwise this report would be even more ridiculous.

For this I would like to see the sources. How is that calculated? What does this include? Only validators? All nodes in the network? Sorry, but I have some huge doubts in these reports. Is the linked (private source) mentioning the raw data that was used?

At least the report and graph Shawn showed seem to not account for sybil validators and addresses. They just mention the problem.

Both @brad.olson.587 and @bkchr have skepticism around the Nakamoto Coefficient number presented above. I would like to say that this skepticism is fair, but wanted to make a few points which may back why I have included this stat above.

First, let’s give a little more insight into how this number has been generated for Polkadot. Obviously I cannot speak for every independent team which researches this number, but here a snippet from yet another independent report from The Block. Unfortunately, I cannot share the whole report in full here.

Polkadot is somewhat unique among blockchain networks in that stake distribution plays a smaller role in consensus and in assessing decentralization. Most other blockchain networks tie consensus voting power to each validator’s stake in the network, which means that validators with large stakes can have outsized influence on the network – and validators that control 33%+ of the aggregate stake can theoretically cause consensus failures.

[…] the Nakamoto Coefficient for other platforms is tightly related to the fraction of stake controlled by the top validators.

On Polkadot, on the other hand, while the stake amount is relevant for electing the active validator set, once this has happened all active validators have equal voting power in GRANDPA. Polkadot further runs processes on top of the phragmen election algorithm to minimize the number of validators per nominator and to try to ensure as even a distribution of stake across validators as possible. This latter optimization is done to maximize the stake of the validator with the lowest stake in the set, which raises the number of tokens needed to join the active validator set and thus increases the amount of stake a would-be attacker would have to risk. Stake distribution still matters, since validators with higher stake are more likely to be selected for the validator set in subsequent eras, but compared to other platforms Polkadot’s election algorithm and consensus protocol greatly reduces the influence of stake in decentralization.

Given the above, Polkadot’s Nakamoto coefficient is equal to the number of validators required to hold 1/3+ of the voting power in the network, and thus is equal to 100.

This is the number of validators that would have to collude in order to cause consensus failures in GRANDPA. The protocol’s optimization of even stake distribution is reflected in the Relay Chain’s low Herfindahl score of 34 (lower implies more equitable distribution) and the relatively small stake percentage difference between the active validator with the highest stake (0.54% of total) and the active validator with the lowest stake (0.29% of total).

So the main reason the Polkadot coefficient is high is due to:

  1. the fact that we have explicitly designed our NPoS algorithm to keep the amount of stake backing each validator as close to even as possible.
  2. the fact that each validator, independent of their stake, has an equal vote in the consensus system.

Number you have seen, and will continue to see for the Nakamoto Coefficient for Polkadot will always be near 33% of the active validators on Polkadot because of these design desicions. If we need a stronger number, we would ideally just increase the number of active validator slots on Polkadot. (Note this is why we have chosen a much more complex NPoS staking system versus a simple DPoS system which you see in many other networks).

Now, if we try to look at the number specifically, it is also fair to be skeptical since we know through Polkadot’s identity system that there are some “entities” which run more than one validator. However, I think the specific number is less important than the comparison made across networks. When creating these charts, these kinds of factors are generally unaccounted for anyway, since it is very hard to have any concrete knowledge as to how many independent entities exist. Imagine that the same person could be running multiple nodes, but just use a different name and identity behind each one, or actually you have a decentralized community of validators who have coordinated to make a single brand.

For example, the number for Bitcoin was in the thousands, but if we look at the hash power distribution, we see just a handful of entities:

In decentralized, public, open systems, trying to do analysis at this level is futile and so we should not even really try. Instead, we should look at the economics and incentivization of these systems, and then compare these numbers relative to one another.

So, then the final piece of the puzzle is to explain HOW Polkadot disincentivizes single entities from getting a disproportionate control of the network, and why we can assume on average (and in the long term) that validators on Polkadot should be independent entities. This is done through the simple economics design in our reward / slashing system:

  1. Your reward as a validator on Polkadot is equal to everyone else, and thus your reward grows linearly with the number of validators you run.
  2. Your punishment for misbehaving on the network grows exponentially as other validators also misbehave.

So we have explicitly created economics which do NOT incentivize users to run many nodes, at least not in any situation where they would get punished. Yes, today there are some entities on Polkadot running a number of nodes, but this is mostly due to poor education of who to select when nominating validators, the likely zero bad actors we have in our system, and the very few slashes that have taken place so far. Over time, this should be self-correcting.

So in summary, while I am not going to claim these numbers are perfect representations of reality, I do think it is perfectly fair to say that Polkadot is a leader in the blockchain ecosystem for providing high security networks with a relatively low number of resources.

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