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4 changes: 2 additions & 2 deletions blogs/BBSecurity/bbsecurity.md
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Expand Up @@ -64,11 +64,11 @@ Such cryptographic protocols can serve as a guiding light for the development of

As important as security is for blockchain bridges, it should not compromise the scalability of the systems. Zamyatin et al. {cite}`zamyatin2019xclaim` discussed the scalability-security trade-off in their study on interoperable assets. There is a need for a balance that allows for scalability without jeopardising security. Future research in blockchain bridge security needs to address this delicate balance, ensuring the development of robust and efficient interoperable systems.

Zhang et al. {cite}`zhang2020research` introduced a method that facilitates asset exchange between inter-firm alliance chains and private chains. Users from both the sending and receiving chains authenticate their identities and secure a certificate by interacting with the alliance chain. When a cross-blockchain transfer request is initiated, the alliance chain validates the ownership of the users over the assets, then proceeds with the asset transfer through a cross-blockchain interaction process.
Zhang et al. {cite}`zhang2020research` introduced a method that facilitates asset exchange between inter-firm alliance chains and private chains. Users from both the sending and receiving chains authenticate their identities and secure a certificate by interacting with the alliance chain. When a cross-blockchain transfer request is initiated, the alliance chain validates the ownership of the users over the assets, and then proceeds with the asset transfer through a cross-blockchain interaction process.

## Maintaining Sovereignty of blockchains

Existing solutions to boost the trust using a stronger blockchain, e.g., via checkpointing, require the weaker blockchain to give up sovereignty. Wang et al. {cite}`wang2022trustboost` in their paper present a series of protocols known as TrustBoost designed to bolster trust across multiple blockchains without compromising their sovereignty. These protocols function through smart contracts, achieving a "consensus on top of consensus" that avoids changes to the blockchains' consensus layers. TrustBoost operates by allowing cross-chain communication via bridges, facilitating the sharing of information across smart contracts on different blockchains. This system maintains its security as long as two-thirds of the participating blockchains are secure. Furthermore, TrustBoost shows potential in mitigating risks associated with cross-chain token transfers and exhibits promising prospects for future applications, especially as heterogeneous blockchain networks continue to mature.
Existing solutions to boost trust using a stronger blockchain, e.g., via checkpointing, require the weaker blockchain to give up sovereignty. Wang et al. {cite}`wang2022trustboost` in their paper present a series of protocols known as TrustBoost designed to bolster trust across multiple blockchains without compromising their sovereignty. These protocols function through smart contracts, achieving a "consensus on top of consensus" that avoids changes to the blockchains' consensus layers. TrustBoost operates by allowing cross-chain communication via bridges, facilitating the sharing of information across smart contracts on different blockchains. This system maintains its security as long as two-thirds of the participating blockchains are secure. Furthermore, TrustBoost shows potential in mitigating risks associated with cross-chain token transfers and exhibits promising prospects for future applications, especially as heterogeneous blockchain networks continue to mature.

## Conclusion

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20 changes: 10 additions & 10 deletions blogs/GOV/gov.md
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Expand Up @@ -21,16 +21,16 @@ Decentralised finance (DeFi) has emerged as a potential substitute for tradition
`````{margin} **Lending Protocols**
Lending Protocols are DeFi applications built on top of blockchain technology that allow users to lend and borrow cryptocurrency assets without the need for intermediaries such as banks or traditional financial institutions.
`````
`````{margin} **Decentralized Exchanges**
Decentralized Exchanges (DeXs) are peer-to-peer trading platforms built on top of a blockchain that enable the direct exchange of cryptocurrency assets without the need for a central authority or intermediary.
`````{margin} **Decentralised Exchanges**
Decentralised Exchanges (DeXs) are peer-to-peer trading platforms built on top of a blockchain that enable the direct exchange of cryptocurrency assets without the need for a central authority or intermediary.
`````
`````{margin} **Yield Aggregator**
Yield Aggregator are DeFi applications that automate the process of seeking out the best yield opportunities for cryptocurrency assets, and provide users with a way to optimize their returns on investment.
Yield Aggregators are DeFi applications that automate the process of seeking out the best yield opportunities for cryptocurrency assets and provide users with a way to optimise their returns on investment.
`````

Centralisation in DeFi has become a growing concern among researchers with several studies identifying a significant level of centrality in the governance mechanisms of DeFi protocol. Barbereau et al., {cite}`barbereau2022defi` found that the decentralisation of voting is significantly low with a majority of the voting power concentrated among a percentage of governance token holders. As evidenced by their findings, there was a significant degree of centrality, in lending protocols, decentralisd exchanges and yield aggregators. This research work employed case studies to comprehend the governance mechanisms of these protocols.
Centralisation in DeFi has become a growing concern among researchers with several studies identifying a significant level of centrality in the governance mechanisms of DeFi protocol. Barbereau et al., {cite}`barbereau2022defi` found that the decentralisation of voting is significantly low with a majority of the voting power concentrated among a percentage of governance token holders. As evidenced by their findings, there was a significant degree of centrality, in lending protocols, decentralised exchanges and yield aggregators. This research work employed case studies to comprehend the governance mechanisms of these protocols.

Similarly, result by Jensen et al. {cite}`jensen2021decentralized` demonstrate centrality in voting power with the protocols top 5, top 100, and top 1000 wallet addresses controlling majority of the voting power in Balancer, Compound, Uniswap and Yearn Finance protocols. In this study, the token holdings and users' wallets of protocols were analysed; Compound displayed the most evidence of centrality and Uniswap the least with the top 5 wallet addresses accounting for 42.1% and 12.05%, respectively.
Similarly, the result by Jensen et al. {cite}`jensen2021decentralized` demonstrates centrality in voting power with the protocols' top 5, top 100, and top 1000 wallet addresses controlling the majority of the voting power in Balancer, Compound, Uniswap and Yearn Finance protocols. In this study, the token holdings and users' wallets of protocols were analysed; Compound displayed the most evidence of centrality and Uniswap the least with the top 5 wallet addresses accounting for 42.1% and 12.05%, respectively.

Barbereau et al. {cite}`barbereau2022decentralised` ascertained that DeFi protocols become more centralised over time. In this longitudinal study, voting patterns demonstrated changes in the power dynamics as time progressed. The tendency for this centralisation of DeFi protocols is shown in [{numref}`gov_evolution`]. Furthermore, in analysing the governance structures of DeFi protocols, Stroponiati et al. {cite}`stroponiati5decentralized` ascribed reward-based economic incentives as the significant cause behind the development of centralised structures.

Expand All @@ -46,26 +46,26 @@ The Tendency for Centralisation in DeFi Governance.
## Challenges & Vulnerability In DeFi Governance

`````{margin} **Voter Collusion**
Voter Collusion refers to a situation where a group of voters collude together to manipulate the outcome of a voting process in their favor, typically by coordinating their votes to create a super majority.
Voter Collusion refers to a situation where a group of voters collude together to manipulate the outcome of a voting process in their favour, typically by coordinating their votes to create a supermajority.
`````

`````{margin} **Voter Apathy**
Voter Apathy refers to a situation where token holders or members of the organisation do not actively participate in the voting process due to a lack of interest
Voter Apathy refers to a situation where token holders or members of the organisation do not actively participate in the voting process due to a lack of interest.
`````

`````{margin} **Sybil Attack**
Sybil attacks occur when an attacker generates multiple false identities to gain significant network control, thereby allocating more votes than expected.
`````

In investigating governance challenges, Ekal et al., {cite}`ekal2022defi` identified voter collusion, low participation rates, and voter apathy as the most significant challenges. This empirical investigation utilised an interview survey approach to collect data from protocol users. Furthermore, to address voter concentration vulnerabilities, Mohan et al. {cite}`mohan2022voting` proposed a novel voting mechanism called bond voting which is resistant to sybil attacks. The bond voting mechanism issues 'voting bonds' to voters, which essentially requires a commitment to stake an amount of tokens, for a time period to gain voting power. Therefore, by combining this time commitment with weighed voting with a time commitment, sybil attacks are more difficult. Quadratic voting, another solution to voting concentration, allows participants to convey both their preferences and the intensity of those preferences, however, the drawback of this mechanism is its vulnerability to sybil attacks, voter collusion and voter fraud {cite}`kiayias2022sok`.
In investigating governance challenges, Ekal et al., {cite}`ekal2022defi` identified voter collusion, low participation rates, and voter apathy as the most significant challenges. This empirical investigation utilised an interview survey approach to collect data from protocol users. Furthermore, to address voter concentration vulnerabilities, Mohan et al. {cite}`mohan2022voting` proposed a novel voting mechanism called bond voting which is resistant to Sybil attacks. The bond voting mechanism issues 'voting bonds' to voters, which essentially requires a commitment to stake an amount of tokens, for a time period to gain voting power. Therefore, by combining this time commitment with weighted voting with a time commitment, Sybil attacks are more difficult. Quadratic voting, another solution to voting concentration, allows participants to convey both their preferences and the intensity of those preferences, however, the drawback of this mechanism is its vulnerability to Sybil attacks, voter collusion and voter fraud {cite}`kiayias2022sok`.

## AI-enabled On-chain Governance

To enhance and automate governance mechanisms, Xu et al., {cite}`xu2023auto` demonstrated an AI-enabled parameter adjustment solution which is more efficient than current implementations. Specifically, the study employed Deep Q-network (DQN) reinforcement learning to investigate for automated parameter selection in a DeFi environment. Although a lending protocol was employed in the study, the model's application can extend to other categories of DeFi protocols as well. In investigating DAOs, Nabben {cite}`nabben2023governance` observes that GitcoinDAO also employs algorithmic governance in various organisational components such as monitoring the compliance with rules of the organisation.
To enhance and automate governance mechanisms, Xu et al., {cite}`xu2023auto` demonstrated an AI-enabled parameter adjustment solution which is more efficient than current implementations. Specifically, the study employed Deep Q-network (DQN) reinforcement learning to investigate automated parameter selection in a DeFi environment. Although a lending protocol was employed in the study, the model's application can extend to other categories of DeFi protocols as well. In investigating DAOs, Nabben {cite}`nabben2023governance` observes that GitcoinDAO also employs algorithmic governance in various organisational components such as monitoring the compliance with rules of the organisation.

## Conclusion

The vision of DeFi is to foster a democratic process of governance and sustain high levels of decentralisation. However, recent studies have highlighted significant centrality in DeFi governance mechanisms, indicating the need for improvements in the existing governance models. The studies analysed in this article have revealed that the majority of the voting power in several protocols is concentrated among the top token holders, with evidence of increasing centralisation over time. Moreover, DeFi has been found to face challenges in the voting and governance process. In view of some of these challenges, researchers have proposed novel solutions such as a bond voting and an AI-enabled parameter-selection solution to improve the current mechanisms. Given the importance of decentralisation in the underlying philosophy of DeFi, proposing more solutions to governance challenges is crucial for creating a more inclusive and democratic financial ecosystem. Therefore, continued research and development will certainly be required.
The vision of DeFi is to foster a democratic process of governance and sustain high levels of decentralisation. However, recent studies have highlighted significant centrality in DeFi governance mechanisms, indicating the need for improvements in the existing governance models. The studies analysed in this article have revealed that the majority of the voting power in several protocols is concentrated among the top token holders, with evidence of increasing centralisation over time. Moreover, DeFi has been found to face challenges in the voting and governance process. In view of some of these challenges, researchers have proposed novel solutions such as bond voting and an AI-enabled parameter-selection solution to improve the current mechanisms. Given the importance of decentralisation in the underlying philosophy of DeFi, proposing more solutions to governance challenges is crucial for creating a more inclusive and democratic financial ecosystem. Therefore, continued research and development will certainly be required.

<div style="text-align: right;font-weight: bold;">Yimika Erinle</div>
<div style="text-align: right;font-style: italic;">April 2023</div>
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