Chainlink chief identifies three genuinely decentralised networks

Chainlink co-founder Chainlink Sergey Nazarov expressed concern about the current state of protocol governance. In his view, there are only three “significantly” decentralised blockchains — Bitcoin, Ethereum, and, of course, Chainlink itself. He said so in an interview Decrypt.

For Nazarov, decentralisation is a “security mechanism”. However, he clarified that the idea also rests on resilience to censorship and transparency.

As examples of “theatre of decentralisation” he cited the collapsed Celsius, FTX, Voyager and the recently hacked Mixin Network.

“Truly decentralised systems remain secure,” the developer added.

In contrast, he recalled the four-year period of Chainlink without hacks. During this time the network processed transactions worth $8.5 trillion.

Nazarov believes that at some point people began to view decentralisation as a “fashionable buzzword”. Meanwhile, many companies started using it “to attract capital”.

Not all is well with Ethereum

Although Nazarov highlighted the second-largest cryptocurrency network, it still faces criticism due to Lido Finance’s sizeable share in staking.

Danny Ryan, a member of the Ethereum Foundation, responded, saying the service undermines the economics of the blockchain.

??? Danny Ryan of the Ethereum Foundation calls @LidoFinance a “corporatization, a centralization and a system threat” of Ethereum.

“What happens when a regulator realizes that 3 people control the vote? I got 3 doors to knock on, easy.” ? pic.twitter.com/K3eDQl5SAm

— Pledditor (@Pledditor) September 26, 2023

«[The Lido team] is pushing a governance token belonging to a venture-capital group to the centre of the protocol,” he explained.

In his view, most of the tokens for distribution are allocated among investment organisations, which “re-create their shabby companies in the blockchain”.

Nazarov sees two paths to resolve the situation. First, end the “cycle of fashionable buzzwords” and focus on building systems that deliver proper security. The other part of the responsibility lies with the people themselves, according to the Chainlink chief.

“We need to become more educated consumers,” he emphasised.

Cross-chain hiccups

As Chainlink seeks to enter the space of cross-chain bridges, co-founder Sergey Nazarov noted that most cross-chain-protocols are “absolutely unsafe”.

“Systems built in this industry promise much, but they are not able to deliver resilience in any way. Creating true security isn’t easy,” he noted.

Moreover, cross-chain infrastructure is hard to decentralise, the programmer clarified. This is because bridges themselves are not blockchain-based systems; they are merely a linking bridge between them.

Most such protocols consist of a single server that passes information and assets between two chains, Nazarov explained. At the same time, organisations can create a false impression of security and decentralisation.

As an alternative, the co-founder of the oracle network proposes developing a cross-network platform governed by several separate networks, which will also be able to respond quickly to risks.

Drawing on the example of his own cross-network protocol, Nazarov noted that the technology comprises three distinct networks on each bridge.

“There are two networks that verify and execute each transaction, and a third, called the risk-management network. It does not execute operations, but approves or rejects them based on a pool of parameters,” he explained.

In August, developers of Coinbase-supported layer-2 Base presented a plan to transition the protocol to a decentralised model, envisaging several technical upgrades and the removal of a single point of failure.

Earlier, similar plans were announced by Polygon, dYdX, StarkWare and Gnosis.