Ethereum is known for its decentralized, distributed nature. What happens when we dive deeper into ETH 2.0’s beacon chain node distribution?

Ethereum is the first universal blockchain that DeFi is making popular through the use of smart contracts. In return, they have created a rich ecosystem of dApps as a web interface for intelligent blockchain contracts with so far 3,778 dApps in 6,730 intelligent contracts. These dApps have reinvented almost the entire financial system – credit, credit, market making, exchanges – and are now turning to blockchain gaming with Metaverse and NFT.

However, this currency revolution is quite fragile. Ethereum may have amassed DeFi momentum with the greatest number of developers and dApps, but its Proof-of-Work (PoW) platform is too expensive for users.

Average ETH gas fee | Source: Ycharts.com

Contrary to the original vision of smooth and cheap cryptocurrency transactions and payments, Ethereum is still evolving. An estimated 71% of consumers prefer to pay by debit or credit card, and for good reason: Transactions are easy, with a certain level of security, often fast (from the consumer’s point of view – they scan and can leave the store immediately with the goods) and they are free . The seller has to pay a fee, usually less than 3%.

Transactions on Ethereum are very different from such traditional payment processors. Ethereum fans argue that the solution lies in the ETH 2.0 upgrade, which converts Ethereum into a proof-of-stake (PoS) blockchain, the Beacon Chain. This will be the new backbone of Ethereum that will manage all shard chains and validators as described in the ETH 2.0 upgrade. At the end of October, Ethereum completed its Altair upgrade, bringing it closer to the Beacon Chain.

What does the Altair upgrade include?

After the Altair upgrade started on October 27, 2021, not long after that, ETH topped its all-time high (ATH) of more than $ 4,500. During this fragile transition, both the PoW and PoS consensus of Ethereum are working side by side.

As the largest beacon chain upgrade since December 2020, Altair is being tested to ensure that the Ethereum and Beacon Chain merger planned for 2022 is successful. Here are some of Altair’s innovations:

• Lightweight clients for easier network interaction due to lower bandwidth and computing costs compared to full nodes.
• Encourage refactoring to get more efficient bit recovery and reduce complexity.
• Fixed some bugs with validator rewards.

In theory, everyone should build an Ethereum 2.0 as quickly and cheaply as other Layer 1 competitor blockchains that have become popular recently. In the meantime, Ethereum will continue to rely on Layer 2 solutions to make this possible. However, outside of the scalability of Ethereum, another problem emerges. How decentralized is it really?

Take a close look at the pHonor from Ethereum

If there are other smart contract platforms with negligible fees and fast transaction speeds, the power of Ethereum is still widespread and decentralized. For the PoS blockchain, a validator corresponds to a PoW miner that keeps the network running.

In simple terms, a validator is software that runs on the node’s hardware. The validator’s job is to approve blockchain transactions and pass this data to a node, which then adds it on the fly. Ethereum is currently hosted by 2,843 nodes, most of which are concentrated in North America and Europe, according to Ethernodes.org.

Distribution of Ethereum nodes | Source: Ethernodes.org

In percent, the USA holds 35.21%, Germany 15.20%, China 6.79%, Singapore 4.89%, Finland 3.87%, France 3.52%, Canada 2, 92% and Great Britain 2.85 %. Together with other countries, North America and Europe make up almost 80% of Ethereum’s nodes.

To further illustrate this centralization, Ethereum 2.0 nodes in the Beacon Chain are even more centralized on the same two continents.

Distribution of Ethereum nodes 2.0 | The source: NodeWatch.io

Of the 4,688 beacon chain nodes, more than a quarter, 27.22%, are in the United States. Taken together, the continents of Europe and North America account for 81% of the node distribution. When compared to Bitcoin, which occupies 13,239 nodes, the trend is similar, but with stronger expansion towards South America and Asia.

Distribution of bitcoin nodes | Source: BitNodes.io

Solana, a smart contract alternative to Ethereum, is also following this centralization trend.

Solana node distribution | Source: SolanaBeach.io

From these images we can clearly see the division between the southern hemisphere and the northern hemisphere. In other words, between developed and developing countries. Even Ethereum, by far the largest smart contract platform with over $ 100 billion in TVL, holds this void.

The real question is, what factors are causing such a concentration of nodes and are they hindering the global adoption of cryptocurrencies?

Why is the southern hemisphere lagging behind?

Viewed as a technology, blockchain networks are ideally suited for geographical areas with low population density or low infrastructure development. That is why Kenya’s M-Pesa has been so successful in bringing financial services to the unbanked areas of the world. Currently, these regions include South and Central America, where 38% and 50% of the population, respectively, do not have a bank account.

With a simple text message on an older phone, one can send money to other M-Pesa accounts with only cellular network coverage (i.e. no data required). A blockchain version of a similar concept is Celo (CELO), a mobile platform that turns phones into virtual banks for crypto and fiat payments using Celo’s cUSD stablecoins.

However, can blockchain technology penetrate further from this base level into the southern hemisphere? Unfortunately, there are major hurdles to overcome at first:

• Economic developing countries can be prone to high levels of corruption. The Corruption Perception Index (CPI) ranks Sub-Saharan Africa at 32 out of 100, the world’s worst rating. South America also scores poorly overall on the CPI criteria.
• In such situations there is little opportunity to introduce new technologies to the community. Since high levels of corruption damage people’s livelihoods, they focus more on meeting basic needs.
• The resource pool, in turn, to raise hopes for the complexity of blockchain projects including node storage, is limited from the start.

External help is therefore required to start blockchain projects in these regions. Namely various UN organizations such as UNICEF and UNDP (United Nations Development Program). Both will provide funds from 2018 to finance blockchain projects in developing countries.

Additionally, the southern hemisphere, with its lagging blockchain infrastructure, faces potential economic sanctions, as we have seen with Iran, Libya, Venezuela, and others. Can these countries follow the example of Estonia, which in less than 30 years has developed into a developed country with a strong FinTech sector?

Only when the governments of the South focus on the expansion of the infrastructure – stable power and mobile communications supply – will the building blocks for e-government be.

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