Cardano (ADA) Is Centralized, Cyber Capital Founder Says

Justin Bons, a full-time crypto researcher and founder of Cyber Capital, has sparked a debate over the centralization of Cardano (ADA). In a series of posts on X, Bons explained his stance which has elicited pushback from users on the platform.

According to Bons, Cardano’s claim of being the “most decentralized” blockchain is undermined by its reliance on “genesis keys,” a multi-signature mechanism controlling the protocol’s rules.

Cardano Genesis Keys: the Point of Centralization

In his assertion, Bons maintains that Cardano is uniquely centralized because these genesis keys allow the parent company Input Output Global (IOG) to exercise significant control over the blockchain. IOG reportedly holds five out of seven keys, enabling it to unilaterally change protocol rules.

1/8) Cardano has “genesis keys”; a multi-sig that controls all rules!

ADA is extremely centralized, as this is uniquely hardcoded into the protocol

IOG controls 5 out of 7 keys & can unilaterally change anything!

Ironic, as ADA claims to be the “most decentralized” chain:

— Justin Bons (@Justin_Bons) May 20, 2024

This control was solidified when the Cardano Foundation (CF), one of the key holders, delegated its authority to IOG, effectively giving IOG absolute power over the blockchain. Bons emphasizes that these keys allow code changes to be implemented without a hard fork, meaning IOG could potentially halt the chain, alter emission schedules, or censor transactions.

Notably, this mechanism was introduced in the Shelley update of 2020. It is not a functionless remnant from Cardano’s founding but an active protocol feature. Specifically, blockchains without on-chain governance rely on mechanisms like Nakamoto consensus, social consensus, or GitHub governance.

However, Cardano’s current reliance on centralized control through Genesis keys distinguishes it from others. Despite this, Bons acknowledges that Cardano has been working on on-chain governance as part of its Voltaire upgrade, which aims to eliminate these genesis keys.

Charles Hoskinson’s Stance on Genesis Keys

Charles Hoskinson, Cardano’s founder, has even threatened to leave the project if the genesis keys are not removed. This as per Bons’ assessment, reinforces commitment to decentralization. The Shelley design papers also clearly indicate the intent to move away from this centralized mechanism.

Cardano’s community is known for its strong commitment to decentralization, and Bons praises its agreement to remove the genesis keys. He attributes Cardano’s slower development pace compared to its peers to its academic approach. In his view, this is both a strength and a point of criticism.

Bons urges the users to verify, not just trust, the intentions of IOG and the broader ADA community. He expressed optimism for Cardano’s quest to achieve true decentralization.

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