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Cardano's MAV grew from 22 to 36 in seven months

Published 24.5.2023

The Minimum Attack Vector (MAV) has increased from 22 to its current value of 36 in about 7 months. This is an improvement of roughly 40%. Although the MAV is not a sufficiently telling indicator of the quality of decentralization, it is one piece of data that is important. Let's explore the details and analyze the reasons for improving the decentralization status of the Cardano network.

TLDR

The MAV coefficient has increased since the Binance exchange stopped staking ADA. The combined stake of the 10 largest operators is now 10% lower than 7 months ago. Over the same period, the number of active addresses increased by almost 300,000 and the number of stakers by 56,000.

What has changed in six months?

In October 2022, we published an article on MAV. At that time, the value of this coefficient was 22. We can use this as a point in time and compare it to the current state. It was around epoch 370.

At that time, the total stake was 25B ADA (73%), and the TVL according to Defillam was approximately 170M ADA. Binance exchange had a significant stake in the Cardano network of over 10%, which was over 2.5B ADA.

Significant changes in the ecosystem

Currently, the total stake is 22.3B ADA. TVL is 430M ADA. Note that the total stake dropped by about 2.7B ADA.

The most obvious change in the context of staking is the significant reduction in participation by Binance. The stake of this exchange has decreased from about 2.5B ADA to the current 70M ADA. The decline in Binance's stake correlates with the overall decline in total stake. Thus, it can be assumed that Binance is behind the decline in total stakes, as it has ceased to stake ADA.

This is very good news for decentralization. Although Binance probably still holds a large number of ADA coins, it does not stake them directly from its pools. It is very likely that Binance currently does not stake the ADA coins of its customers.

Another factor is the growth of Total Value Locked (TVL) in DeFi. TVL has grown from 170M to the current 430M, a roughly 2.5-fold increase in 7 months.

Another significant change is the increase in accounts holding ADA coins, which grew from 1.987M to 2.278M over the period under review. The increase is 291,000. The number of delegates rose from 1.223M to 1.279M over the same period, an increase of 56,000.

Why did the MAV coefficient increase?

The growth of MAV was caused by the fact that the Binance exchange stopped staking ADA. The departure of a major player with a large stake increased the number of operators who would have to cooperate to have a stake higher than 50%.

Unfortunately, we do not have complete historical data. However, as you can see in the table below, 20 operators (including Binance) together accounted for roughly approximately 48% of the total stake. Currently, 26 operators together account for roughly only 41%.

Note also that the stake of the 10 largest operators was almost 38% in the past, now it is only 28%. That's an improvement of 10% (correlating with the Binance stake).

It is also interesting to note that the stake of AVENGERS, currently the largest operator, fell slightly from 9 to 8.4%. On the other hand, the stake of operators WAVE, ADALITE, MS, ETORO, and others increased slightly.

The smallest operator mentioned, JAZZ with a stake of 0.5% of the total stake, is a multi-pool operator (MPO) like all operators in the table.

Conclusion

The operators have an economic incentive to behave honestly because they risk that the stakeholders will leave and they will not get paid. This principle is the same as how pools work in the Bitcoin network. The principle of delegation forces the producers of blocks to perform exactly what is expected of them. This is why the MAV coefficient is not a sufficient indicator. The number of stakers (in the case of Bitcoin, this would be miners) and their size must be included. Pool operators have a significant impact on the network, along with the largest holders of the resource (coins or hash rate).

Ideally, there should be 500 saturated pools in the Cardano network. The reality is that the blocks are produced by roughly 1200 pools. While the MAV coefficient is increasing, we are still quite far from the ideal state. Blocks should be produced by fewer pools with higher saturation. Ideally, MAV should grow mainly due to the declining stakes of large operators.

Disclaimer: please note that the MAV is extremely difficult to quantify correctly and essentially impossible. As a voluntary measure, we do what we can to quantify it as best we can. You can contribute your insight/changes at any time.

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