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Censorship resistance is considered one of the key value propositions of blockchain technology and digital currency. However, many decentralized networks end up not investing enough in the curation and maintenance of censorship resistance. This results in a large share of the computing or voting power being owned by just a few players. In this scenario, censorship resistance might be partially compromised. But why is that and, most importantly, how can this be avoided?
In this article, you will learn the basics of censorship resistance and why it is essential. In addition, you will dive into the methods used in the Solana ecosystem to facilitate censorship resistance and how you, as an $SOL token holder, can make a difference in the decentralization of the network.
As explained, cryptocurrencies and their underlying blockchain technology have censorship resistance as one of their main value propositions. Therefore, censorship resistance can essentially refer to two main meanings:
Ultimately, these two meanings result in one major value for public blockchain networks: autonomy over your assets and funds. Censorship-resistant networks mean that no nation-state, government, single-entity, or third-party controls may transact or store their assets on a specific blockchain. Furthermore, it guarantees that the network's laws, established in advance, cannot be changed retrospectively to suit a specific agenda or vested interest by a single entity. In other words, censorship resistance gives full sovereignty back to people, and all you need is an internet connection.
In a traditional financial system, there is always a "middleman" approving or denying your transactions. It can be banks, payment companies, fintech firms, or even governments. These authorities serve as intermediaries for their users. This gives them the power (sometimes enforceable by law) to censor certain transactions like blockchain transactions that they might label as suspicious or unwanted. While these rules serve as anti-money laundering initiatives and help avoid other financial crimes, it still limits consumers' freedom over their funds.
Transacting in fiat currencies exposes consumers to political and geopolitical intervention. State-implemented sanctions, asset freezes, or capital restrictions to prevent investors from transferring their money abroad are just some of the interventions you will be vulnerable to without censorship resistance. The notorious Robinhood - Gamestop incident is a famous example of powerful middlemen censoring their users.
Furthermore, censorship resistance is also desirable beyond the financial world. Social networks like Facebook, marketplaces, and platform economies are other venues on which censorship resistance can protect users or entrepreneurs from the threat of being thrown out or rules changing overnight in favor of the party controlling the network like governments, authority figures, or a corporation.
In an authoritarian environment, the government shuts down the bank accounts of the people who are its critics. They can't do that anymore with bitcoin ... Bitcoin is like a machine that turns green into freedom." Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation
But just because digital currencies like Bitcoin and Ethereum are built for censorship resistance doesn't mean it is virtually impossible to censor transactions. For example, the security model of the Bitcoin network relies on majority rule, so in theory, a single entity could gain control of a network by performing a 51% attack. It is important to note that a 51% attack is resource-intensive. Another example of this is also seen for proof-of-stake networks when very few users control too much stake, and they could theoretically collude and censor the network. Some types of blockchain technology are more susceptible to this type of censorship. But all of them need to constantly keep an eye on decentralization to avoid losing the censorship resistance value. To understand this concept better, let's focus on censorship resistance on the Solana network.
Solana is designed as a censorship-resistant blockchain. It is built to be a decentralized network in which users can make transactions without intermediaries. It's worth noting that according to the Nakamoto coefficient, which quantifies the decentralization of a blockchain, Solana is far more decentralized than many other blockchains.
The Nakamoto coefficient, named after Satoshi Nakamoto (Creator of the Bitcoin Protocol), considers the minimum number of entities required to compromise a critical system component, thus controlling or halting the whole network. For example, on Solana and other Proof-of-Stake networks, 33.33% of the network's total stake would have to be compromised to halt or unanimously influence the overall network.
It is essential to keep this minimum 33% stake well distributed for several reasons. For example, let's say only one validator holds this amount of stake. Then, the country where this validator is based decides to impose harsh regulations on crypto projects. If this validator can no longer properly operate, the whole network would be compromised. By distributing this minimum stake between many validators, if one suffers the same scenario or another, there will be another to keep the blockchain network safe and running.
To guarantee that this minimum stake is maintained, Solana has a measure called the maximal security group. It is the smallest group of unique nodes that comprises ≥ 33.33% of the total stake on the network. This means that the security group is the minimum number of nodes that would need to be compromised to halt the network - those 18 validators mentioned earlier.
Once Solana's maximal security group is identified, the Solana Foundation's total token pool (initially 100,000,000 SOL) is shared in equal portions based on the number of eligible nodes outside of this group. This is important to decentralize the network further, making it more censorship-resistant. The goal is that the security group continues to grow in size.
This will not only protect the network from external censorship but also from a single validator holding so much control that they can shape the network based on their personal needs and desires. That is because, on Solana, a validator's governance power is related to how many SOL tokens they stake. The more SOL staked, the more voting power. Thus, if a given validator is too big, it can use its voting power to change the rules of the network without considering the whole community. That is why empowering smaller validators is extremely important and a priority for the Solana Foundation.
On top of the Solana Foundation's efforts to keep the network resilient to censorship, you, as an SOL holder, can also help with this cause. By choosing to stake with validators outside the security group, you can do your part in decentralizing the Solana network.
If you don't know who the validators of the security group are, Solana Beach offers a great feature that displays this information. You only need to visit the "validators" tab on Solana Beach. The first row comprises the security group with the larger validators.
To access data about the validators of this group, you will have to click on the far-right button "show validators." Solana Beach wants to nudge people to explore validators outside the current security group by hiding these validators behind another click. Solana Beach is aligned with the mission of the Solana Foundation to keep decentralizing the network. Alternatively, you can also choose to split your stake and delegate to multiple validators. You can learn how to do so in these two guides; 'Staking on Solflare with a ledger device' or 'Staking on Solflare without a ledger device.'
Whatever you do, always do some research about the validators that you consider delegating to - look them up on Solana Beach, monitor your transactions, and click on their profile to find links to their social channels and/or websites.
Holding $SOL gives you great power and as the good ol' Ben Parker said, "with great power comes great responsibility." Therefore, make sure to choose to delegate your SOL to smaller validators and, in turn, help with making the network more decentralized, censorship-resistant, secure, and ultimately more valuable. In the end, we hope that others partaking in the crypto economy continue to delegate their assets and participate more in decentralized finance.
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Please note that none of this is to be considered financial nor investment advice. We highly advise you to always do your own research (’DYOR’) before interacting with any of the projects or tools we write about. Crypto is a highly dynamic and fast paced environment with lots of moving parts that can quickly change.