Friday, July 28, 2017

Paving the Future of Blockchain Technology

The advent of these massive mining pools and the consequent power bestowed on the organizations behind them really begin to challenge the idea of Bitcoin as a decentralized cryptocurrency while increasing the possibility of 51% attacks, which we’ll discuss later. In short, if the trend continues, we may reach a state where new bitcoin discovery is almost completely dominated by the largest miners.

Micali instead proposes Algorand, an incentive-less public blockchain that attacks the Byzantine Generals’ Problem by swapping out the generals in each round through a randomization process. While I won’t discuss the mechanics in detail here, this approach avoids the amount of computation resources needed for proof-of-work and yields faster transactions as a result.

The differing approaches revolve around the interesting philosophical question about whether humans are dominated by their altruistic or selfish urges as a whole. Proponents of Micali point to chronic, altruistic seeders on Bittorrent and distributed computing projects like Genome@Home as evidence that we do not always need incentives to promote altruistic behavior. Meanwhile, Vitalik Buterin and Vlad Zamfir of the Ethereum Foundation are firmly in the opposite camp, believing that without incentives and penalties, people can be at best apathetic (why even log on?) and at worst malicious.

While the bulk of the blockchain movement embraces the idea of incentives and cryptoeconomics, it is definitely possible that Micali’s system and variants of it may take root in parallel.

It is an open question of whether you need incentives or not, and I don’t think it can be determined in an academic model. It is actually going to be determined by evidence. You launch something and you see what happens. — Charles Hoskinson, Previous Ethereum CEO

While Bitcoin’s PoW system is not perfect, the fact remains that the paradigm-shifting, cryptoeconomic principles it was built on (cryptography to secure the past, economics to ensure the future) have led to its survival and adoption for almost a decade.


To assess the design of protocol capability to mitigate these existing and theoretical flaws in these security models, developers utilize two concepts:

The first is the cryptoeconomic security margin, which measures the consequences (in dollars lost) of those violating a protocol guarantee. Theoretically, since the attacker can execute the P + epsilon attack at zero cost provided he or she has the budget, Bitcoin’s PoW system can be said to have a cryptoeconomic security margin of zero!

Cryptoeconomic proof is somewhat similar; it is an assurance or message from a participant in the network that something is true. In the event that it turns out not to be true, that participant will lose a certain amount of money.

So let us examine the most ambitious project on blockchain tech today — the coming Casper update to Ethereum that attempts to drill to the heart of these problems by switching the platform proof-of-work to proof-of-stake. While a discussion about the intricacies of Casper’s Proof-of-Stake (PoS) system is beyond the scope of this article, in short PoS seeks to provide a very large cryptoeconomic security margin by enforcing large security deposits of Ethereum in lieu of computing power in order to serve as a validator. This security deposit, or cryptoeconomic proof, acts as a potent deterrent. The message is clear — cause trouble and lose everything!

Casper forces participants to enter a SchellingCoin Game (as outlined by our iron-styrofoam throne example) where they are forced to bet their security deposits on what the majority will be. Using the same recursive logic we discussed in the iron throne game, the majority of participants will accurately vote on which transactions are valid because each participant expects everyone else to reach the same conclusion. As such, PoS is resistant to the P + epsilon attack because the attacker will have to credibly show an enormous budget to subsidize the participants’ security deposits in the event that they end up voting in the minority.

In the context of the security models, we can see Casper’s resilience in the uncoordinated choice model and from bribing attackers. Casper is also theoretically susceptible to the 51% attack stemming from the coordinated choice model. However, like Bitcoin, as Ethereum grows the costs of doing such an attack are so prohibitive as to almost completely discourage it. In Casper’s case, the threat of losing the stakes of all involved is an even stronger deterrent.

- More Here

No comments: