Coinbase, a well-known U.S.-based cryptocurrency exchange, has introduced a groundbreaking new measure called the h-index to combat inaccuracies in tracking blockchain adoption caused by airdrop-related activities. Renowned for its development of Base, a layer-2 solution for Ethereum, Coinbase aims to provide a more precise assessment of blockchain network adoption with this innovative metric, which aims to address distortions resulting from airdrops and Sybil attacks.
In a recent research report, Coinbase highlighted the surplus of blockspace due to investments in blockchain infrastructure, leading to lower transaction costs and an influx of decentralized applications. While this development has fueled network growth, it has also made it difficult for analysts to accurately gauge ecosystem adoption as more applications enter the market.
Traditional metrics like total transactions and daily active addresses are susceptible to manipulation from Sybil attacks and airdrop activities, according to Coinbase. To tackle this issue, Coinbase has proposed the h-index, a metric that takes into account the depth and breadth of onchain adoption by tallying the number of addresses receiving transactions from an equal number of unique sending addresses.
Recent data from Coinbase indicates that Ethereum and Base networks exhibited the highest levels of user activity, followed by Arbitrum and Polygon, when the h-index was applied for the week ending June 6th. While acknowledging that the h-index is not without its flaws, Coinbase believes that it offers new insights into comparative chain adoption by mitigating the impact of Sybils and providing a broader measure of growth.
Despite the promising aspects of the h-index, Coinbase acknowledges that challenges persist due to variations in blockchain execution environments, which can affect transaction formats and data interpretation. Additionally, the presence of exchange or smart contract wallets could potentially distort the numbers, further complicating the measurement of network adoption.
Sybil attacks, a prevalent form of network attack in the crypto industry, involve a single entity creating multiple fake identities or nodes to manipulate a network’s operations. This type of activity can skew network metrics and data by generating fake accounts or addresses to artificially inflate transaction volumes and user activity, distorting the perception of network usage and adoption.
Overall, Coinbase’s introduction of the h-index represents a significant step towards more accurate and reliable measurements of blockchain network adoption, despite the ongoing challenges posed by Sybil attacks and other distortions in the crypto space.