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Finding reliable metrics in the cryptocurrency market is hard. This was the main talking point during a trio of talks at November's Consensus Invest conference around strategies related to measuring and comparing various crypto assets.
"We have highly-gamable metrics in some cases," he said Blockchain Capital's Spencer Bogart during his presentation.
While Bogart mentioned the dangers of low-quality data in his talk, he was Was used-for-second (TPS).
"I said Bogart." I think this is a misallocation of the hundreds of millions of dollars.
The Cost of Decentralization
According to Bogart, decentralization is what makes a public blockchain valuable. Indeed, the difficulties associated with changing Bitcoin's protocol rules (due to its decentralized nature) are what make of the system possible.
"Bogart stated."
Taking this point further, Bogart added, "If we want to maintain and enhance decentralization, we will be able to participate directly in the network with consumer-grade hardware."
Transactions-Per-Second and Decentralization
This is where the TPS metric comes into play. Depending on the types of transactions that are encouraged, a high TPS can be detrimental to the decentralization of the network.
"Many efforts to increase throughput," said Bogart.
This is the case that we are looking for: Bitcoin or Ethereum with traditional, centralized systems such as Visa, but in the view, there is a lot of money any increase in throughput must be balanced with the potential harmful effects on a cryptocurrency network's relative level of decentralization.
A Layered Approach to Increasing Throughput
Bogart went on to divide the various methods of increasing a network of cryptocurrency throughput into two major categories.
The first is the brute force method, which involves more on-chain transactions. An example of this option is the Bitcoin Cash network.
"What you're doing is increasing the cost and resource requirements of [processing transactions], which means fewer [users] "are going to be a node on the network," added Bogart. "You end up with the worst of both worlds. You do not have the decentralization or resiliency of a decentralized network. "
The second option is a more elegant, layered approach. An example of this category would be Bitcoin's Lightning Network, where transactions are cached before they are confirmed directly on the blockchain. In Bogart's view, Bitcoin's approach to increasing TPS is neutral for decentralization, while also capable of enabling Visa-level throughput.
In his conclusion, remarks, Bogart made it clear that cryptocurrency networks that are more likely to raise the resource requirements of the full node through increased on-chain activity. It should be seen in the context of the whole story when it comes to comparing the level of activity on the various cryptocurrency networks, in addition to transaction batching and other considerations).
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