Bitcoin and its forks are the most auditable blockchains, according to a Dec. 17 report from CoinMetrics. The report examines the blockchains behind the top ten cryptocurrencies, eight of which CoinMetrics operates nodes for. CoinMetrics synced data for each blockchain, reconstructed its ledger, and verified its coin supply.
CoinMetrics graded each blockchain on two main criteria: the efficiency with which its node software can synchronize with relevant data, and the ease with which that data can be put together to form a complete and meaningful ledger of transactions. CoinMetrics also assigned a letter grade to each blockchain whenever possible.
CoinMetrics awarded an A to Bitcoin in both categories because of its UTXO model, which makes ledger reconstruction straightforward. The firm also gave an A to Litecoin, Bitcoin Cash, and Bitcoin SV, all of which are forks of Bitcoin. However, CoinMetrics gave a B to Tether, which relies on a relatively complex Bitcoin layer called Omni.
Meanwhile, Ethereum received a B for ease of node operation and a C for ease of ledger reconstruction. CoinMetrics noted that it is difficult to audit Ethereum for several reasons—including the blockchain’s non-UTXO account model, its complex smart contract transactions, and its long synchronization times, among other things.
Some blockchains did not fare very well. EOS was given an F for node operation due to the fact that its synchronization process took nearly a month and demanded terabytes of fast storage. CoinMetrics also gave Binance Chain an overall F due to its closed-source software, which obscured the blockchain’s fee structure and made a full audit difficult.
Since CoinMetrics does not run a node for XRP or Stellar, it did not assign a grade to those blockchains. However, it did single out XRP for criticsm: “A handful of assets, most notably Ripple, require such huge amounts of storage (tens of TBs) that they are impractical to run and synchronize.” It seems that an XRP audit would be quite demanding.
CoinMetric’s report should not be seen as an attack on the blockchains in question or their basic functionality. Furthermore, the report does not mean that any cryptocurrency’s market capitalization is inaccurate. It merely reflects CoinMetrics’ opinions about how easy it is to audit certain blockchains with software that is currently available.
Despite these caveats, CoinMetrics’s observations seem to provide a general rule that can be applied to platforms beyond the scope of its report: blockchains that are light on data and blockchains that follow Bitcoin’s basic UTXO model are highly auditable. Of course, it is not surprising that simple blockchains are easy to audit.
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