Input Output Global (IOG) has partnered with the University of Edinburgh to develop the blockchain industry’s first ‘decentralisation index’.

The Edinburgh Decentralisation Index (EDI) aims to create more transparency by using a research-based methodology to produce a framework that consistently determines the ‘decentralisation’ level of public blockchain projects.

Protecting against high levels of centralisation aligns with the core principles of blockchain systems and can safeguard against events such as when a centralised control of funds means end users can’t withdraw their investments.

The EDI will be a live tracker underpinned by a continuously calculated and reviewed methodology, with calculations being carried out by a team at the University of Edinburgh. This review process is designed to account for volatility in the crypto market, while evolving to address innovations within the blockchain industry. Through this, people interested in the crypto market can gain a greater understanding of how decentralised projects are and the risk factors associated with them.

The first step for the tracker is the creation of research papers detailing decentralisation metrics and a considered methodology for compiling them into an index, created by researchers at the University of Edinburgh.

It will operate in the same way as other industry indexes, such as the Cambridge Bitcoin Electricity Consumption Index from the Cambridge Centre of Alternative Finance at the University of Cambridge Judge Business School, which provides a live tracker of how much energy the Bitcoin blockchain is consuming.

Professor Jane Hillston, Head of the School of Informatics at the University of Edinburgh said: “In the School of Informatics at the University of Edinburgh we look for opportunities to work with industry where we can, to form a genuine partnership that not only translates academic research into useful outcomes for wide groups of beneficiaries, but also stimulates further research on interesting problems.

“Our collaboration with IOG is an excellent example of this and we are proud to be launching this project to create the Edinburgh Decentralisation Index. It represents a challenging technical problem that has the potential to significantly benefit within the blockchain market.”

The blockchain decentralisation index could also lay the groundwork for the characterisation of digital assets. With some debate over how assets should be classified, decentralisation has become an important factor. As a result, the EDI could become a useful tool for lawmakers and regulators.

It could also promote the preservation of some of the unique capabilities of blockchain, such as transparency, censorship, resilience, and integrity, which all rely on decentralisation, as well as informing users about potential risks.

Decentralised systems reduce this risk by spreading out control among many blockchain participants, thereby mitigating control and information asymmetries. Despite the importance of decentralisation, there is currently no universally accepted measure of decentralisation across different systems. The EDI will be the first step in solving this issue.

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Charles Hoskinson, CEO of IOG, said: “Decentralisation is at the heart of what makes blockchain technology so unique and so potentially revolutionary. By decentralizing a system, we’re putting power back into the hands of everyday users and investors.

“What we’re currently missing is universally accepted industry standards which define to what extent projects are decentralised. The EDI will allow us to ensure that users have full transparency around what they are participating in.

“By working together as an industry on these standards, we can ensure we can protect consumers without stifling some of the exciting innovation that makes our industry stand out. This is why tools like the EDI will be so important – it’s an example of the exact kind of work we should be doing to help progress our industry in the right direction, while preserving the founding ethos of blockchain.”

This accompanies a $4.5 million donation by IOG to Edinburgh University, as well as the launch of a Zero Knowledge Lab, which will carry out vital research into the safeguarding of personal information.

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