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Additionally, overlay currencies can be fragile when there are flaws in the implementation that can make consensus protocols fail. If two overlay implementations of a currency disagree about whether a specific transaction is valid, they could split the currency in two and have potentially devastating consequences. However when miners validate the transactions they are far less likely If it does happen the issue will be identified quickly and will likely be resolved without leading to the possibility of a fork. Influencers Email  listing

Another consideration, regardless of whether or whether or not we’re using an overlay is the issue of adding or “polluting” the Bitcoin block chain by introducing transactions beyond its original purpose. This is a thorny issue within Bitcoin’s Bitcoin community. We’re not going to pick sides however we will point out that there’s a solution to address this issue by making use of Bitcoin as a purely timestamping service as we discussed in Chapter 9.1 and not as a data storage service. As of 2015 , there are some emerging services that provide an additional block chain which is a data storage facility, however it is timestamped using bitcoin’s Bitcoin block chain. It’s similar to the GuardTime service described in Chapter 9, but with hashes that are committed each minute for the Bitcoin block chain, instead of each week’s newspaper. Utilizing Bitcoin for timestamping only requires 1 transaction for each block (for each protocol or service). The drawback to this is that external data stores are not likely to be as replicated and accessible like Bitcoin’s block chain. In addition, they introduce the possibility of centralization. Influencers Email address lists

marketing database Influencers Email
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To summarise, regardless of whether it is embedding is a technique or not it is true that Bitcoin’s block chain does provide a wide range of innovative applications. It has the advantage of broad-based adoption from both miners and users making it a safe and easily deployable choice.

Route 2 Alternative block chains Influencers Email lists

Another method of decentralization is to make use of another block chain. Again, there are several alternatives. The most obvious is to create an independent block chain with distinct rules, features as well as currency i.e. the altcoin. There is also the option of sidechains, which we discussed in Chapter 10. The primary differentiator is that the cryptocurrency that is represented by the sidechain will be linked in a 1:1 way to Bitcoin. Sidechains that have enhanced capabilities for scripting could enable us to create more complex contracts, and also allow the disintermediation. But, the support for sidechains will require changes to Bitcoin which, in 2015, it hasn’t been implemented yet. Influencers Email  database providers

The alternative is to make use of an alternative block chain that has the capability to develop new applications using it. In 2015, the top project that aims to become an alternative platform for decentralized cryptocurrency-based applications is Ethereum that we have discussed in Chapter 10. In theory, it’s an ideal platform for decentralizing the creation of arbitrary, complex contracts. But it does have some practical issues: at the time of writing it doesn’t have the level of maturity, adoption or mining capabilities that of Bitcoin or Ethereum, nor has it had the same amount of attention. It is, however, an intriguing thought experiment in the decentralization of powerful contracts, and or Ethereum or similar systems could be feasible in the near future.

Template for Decentralization

We’ve looked at a variety of ways to achieve decentralization in the block chain. The next step is beneficial to create a model of what decentralization should look like in terms of what’s being decentralized, what kind that block chain type is suitable and what exactly the term “decentralization” means for security and entities.

Levels of Decentralization Influencers Email lists

Decentralization through disintermediation.Let’s return to the example of the smart car. To better understand this Let us consider what is the actual process that this new digital form of ownership transfer is attempting to replace?

As an illustration of property In the United States, ownership is established by the title documents. It is an centralized method of ownership. The title document is only valid significance only in the degree it is recognized by you can prove that the Department of Motor Vehicles (DMV) recognizes it. If a vehicle is sold, it’s not enough to transfer the title record from seller to buyer. The transfer needs to be verified in person by the DMV and then they make changes to the central database. By using block chain transfers, we shift from a government-controlled centralized process that does not have any intermediaries. The process achieves decentralization via elimination of intermediaries. Influencers Email  database providers
Disput mediation: decentralization by competition.Now suppose that there’s a dispute over the purchase of a vehicle. Maybe the seller offered a lemon car to the buyer. The buyer is dissatisfied and would like to rescind the sale. In Chapter 3 we talked about the multisignature transactions with two out of three signatures that can permit escrow in the event that, along with the purchaser and seller there is the mediator or judge. In this case the buyer could transfer bitcoins in a separate transfer from the vehicle, but not directly to the person selling instead, to a three-digit address, which is shared by the seller, buyer along with the mediator. The mediator is able to either accept the transfer, or reverse it by enlisting the assistance of the other or one of the parties however, they are not able to steal the funds. Influencers Email  listing

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This is a great start in the process of creating a dispute resolution mechanism however there are several details to be resolved. The first is that we have lost the completeness of the sale of the car that we previously relied upon. It is also unclear if the car’s ownership can be reversed by transferring the money. Thirdly, if the vehicle is transferred to a 2-out-of-3 address, which key fob is allowed to unlock the car while in this condition? The purpose of this article is not to solve these problems but rather to make use of the scenario to examine the role of mediators. Particularly, let’s look at this mediation model in comparison to a more conventional model. Influencers Email  Profile

What is the process for dispute mediation in the real world? It is likely to be by the legal system. which is a centralized, state-controlled process that can be best handled by hired lawyers. In contrast when a digital contract is in place it is possible for the parties to select the mediator they like. Not being obligated to cooperate within the legal system, there is a private market for mediation that could develop where intermediaries could compete for perceived efficacy, fairness and costs. There are a variety of obstacles. The first one is incentives mediators may be bribed by one of the parties to the transaction. Another reason is that the funds are kept in escrow during the dispute-filing time. In addition, the participants could be anonymous, making it difficult to finally engage the courts in case internal dispute resolution is unsuccessful. Even if the parties can be recognized Digital contracts are not acknowledged by courts. Influencers Email  database providers

Our argument is that this isn’t disintermediation through decentralization — we’re not completely removing the intermediary. Instead, it allows entities to decide who they will choose to trust. It is decentralization by competition.Thus there exists a range that on one hand you only have one mandatory intermediary, and on the other you eliminate the requirement to have any intermediary at all and complete elimination of intermediaries. On the other hand, there is a middle where you may be competing with multiple intermediaries, as we have just seen. In actuality, we discussed this in Chapter 9 as we looked at the decentralized prediction market. Instead of one company, such as InTrade operating the market, the participants have the freedom to select who they trust among the many competing arbitrators performing the delicate tasks within the market. Influencers Email lists

How Security is Achieved

Another observation can draw from this instance. The security of the mediation process is not dependent on the atomicity. It is based on faith in the mediator. What is the best way to make mediators trustworthy? There are a myriad of methods, but the most obvious factor is reputation. Contrary to atomicity which is an advanced security mechanism that builds reputations over time by inherently social processes. buy Influencers Email database online

Reputation is a crucial role to be played in the absence of technological solutions or as an alternative to these. However, it’s not without its drawbacks. Reputations are tied to identity and, if they aren’t permanent or bindable, reputation won’t perform effectively. For instance, if an establishment receives bad reviews on the internet and then decides to shut down and reopen with the same management, but with using a different name, the reputation will be ruined. In an environment where there is no privacy the reputation system is not able to function even if they are in a pseudonymous setting in which identities can be changed easily, systems based on reputations face serious problems. Reputation-based systems also have to prove claims made by “he said / she said” statements that can affect the reputation of an individual. In the traditional system, such as Yelp businesses operate under the name of their actual business as do their users to a degree. In an anonymous environment it is difficult to discern false allegations from the factual information.

There are various other security methods such as secure hardware, which we won’t go into details about. No matter what mechanism is employed it is still the security issue due to the lack of real-world enforcement. There are no sanctions to punish a person for their behavior, and disputes are unlikely to be resolved in the courts, particularly if nobody is using authentic identities. The idea of granting debts is unworkable because there isn’t enforcement mechanism to guarantee that they are repaid Therefore, transactions typically require deposits, which are used to lock funds during the time of dispute. Influencers Email lists

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The sidebar is trust.Some individuals in the Bitcoin community employ terms like “trust minimization” or “trustlessness” as a way to achieve. It could sound contradictoryaren’t we all looking for systems we can trust to function properly? Influencers Email  database

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The word”trust” can have different definitions, which could lead to this confusion. If Alice gives Bob ten dollars and states that she’s trusted him, it believes that the person is trustworthy, and has faith that he’ll repay her. In terms of security the term “trusted” refers to one you’re obliged to trust. When people refer to the term”trusted” to describe Certification Authorities, they are implying that security guarantees for online services are null and void if these authorities behaved in a way that was not acceptable to them. Influencers Email  Profile

“Trust minimization” is a beneficial goal in the sense that, all other things being equal, we’d like to design systems that contain less components we rely on to ensure security. However, when you’re using the hammer, everything appears like nails, and Bitcoin people tend to get caught up in the removal of trusted components from systems. A trusted component isn’t always a bad thing in and the fact that there exists an actual trust relationship is not a major issue in and of itself. The removal of trusted components may come with other, less obvious disadvantages.

We’ll discuss these aspects in the section that follows however, for the moment we’ve noted the complexities in the concept of trust we’ll try to steer clear of the word and instead focus on security, which is a more clear word. buy Influencers Email database online

The Framework

To summarize the chapter at this way it is possible to define the various ideas for decentralizing a vast array of subjects through four key questions

1. What is the decentralization process?

2. What is the degree of decentralization? Influencers Email lists

3. What block chain is being used?

4. What security method does it use?

If we can answer those four queries, we could concisely summarize almost all of the suggestions we have seen from the Bitcoin community for decentralization based on block-chains. Let’s look at a few examples.

Example: Smart Property

1. What are the decentralized aspects? Trading and property ownership
2. What is the degree of decentralization? Disintermediation
3. How is the block chain used? The block chain of Bitcoin
4. What security mechanism does it employ? Atomicity


The concept of smart property as you’ve witnessed has the potential to centralize the idea of ownership of property and transfer of ownership. It eliminates all intermediaries -and eliminates the need for organizations like such as the DMV as well as the government. We demonstrated how to achieve it with Bitcoin’s blockchain however you could make use of a different block chain. The most important security concept we employed was atomicity, which was used to tie the payment and the transfer of car ownership. buy Influencers Email database online

Example: Decentralized Prediction Markets

1. What is decentralized? Market prediction
2. What is the extent of decentralization? Disintermediation, competition
3. Which block chain has been being used? Altcoin
4. What security mechanism is it using? Reputation or the atomicity Influencers Email lists

In a central predictor market, the central platform or exchange provides at least two essential functions such as arbitrating the outcomes of every event that is wagered on and also selling shares to users (or providing participants with the ability to securely trade with one another). The market for decentralized predictions that we explored in Chapter 9 removes the requirement of an authority that is central for both of these functions. It lets anyone create a market around an event and act as its arbitrator by making an easy transaction, which lowers the entry barrier for taking on this role. Therefore, intermediaries remain however users have the freedom to choose from a range of intermediaries that are competing, and in the event that the user is unhappy, they are able to take over the task for themselves. In contrast it is possible for users to trade shares between themselves atomically, thus this role of central authority has been eliminated. Decentralized prediction markets demand a different functions that are not available in Bitcoin itself and therefore are implemented using a custom altcoin, which has the block chain of its own.

Example: StorJ Influencers Email  database

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Influencers Email business database free download

Influencers Email  database

1. What’s being decentralized? Retrieval and storage of files
2. What is the extent of decentralization? Competition Influencers Email  Profile
3. What is the block chain that is used? Bitcoin
4. What security system does it use? Reputation

StorJ is a concept proposed of Greg Maxwell for file storage and retrieval. It’s been evolving through time, but here we’ll look at a simpler version. In the simplest terms, StorJ deploys an “agent” which is located on the cloud, and has been programmed to take certain choices independently. For instance, it is able to lease cloud computing and storage to supply itself with computational resources. Another service it offers users is the option to store a file over the duration of a specified time, like 24 hours, and then exchange it to pay in Bitcoin. The service will host the file for as long as it receives payment. Beyond just storage it can perform various interesting things we won’t discuss here. In our framework, StorJ is a decentralized storage service that allows file retrieval, which are most important features of centralized services such as Dropbox. The agent functions as an intermediary and it is not important for the purposes of this article whether it’s automated. But, it is possible to Influencers Email lists
competition among intermediaries. Payments are processed using Bitcoin however there is no connection between the person who performs their services as well as the payment it receives, therefore security is an issue of the reputation of the intermediary. Influencers Email  id list

Zerocoin, which we have discussed in the chapter 6 is a way of decentralizing mixing of coins and achieving anonymity. Instead of a central mixing system, Zerocoin realizes a cryptographic protocol that’s functionally similar to mixing but does not require intermediaries in any way — it is all mathematics and consensus. The extremely complex cryptography used for Zerocoin (and its predecessor, Zerocash) means that an independent block chain is a more viable option. For the security aspect it is important to remember that the idea to burn a basecoin as well as receiving a zerocoin as a substitute for it is atomically linked via the same transaction as well as later redemption of the zerocoin. This is an instance of the concept of atomicity.

When is Decentralization a Good Idea?

In the previous chapters we’ve focused on the technical aspects to achieve decentralization. We’ll now dive into the subject of motivation. These aren’t technical, but they’re usually just as difficult to answer. Is decentralization an ideal idea? Does it make sense economically? Which are the sociological implications of decentralization?

So far, we’ve utilized the term “decentralization” as a technical term but without acknowledging the fact that it is political associated with it. When we speak of the replacement of traditional systems completely or partially with technology in reality, we’re talking about decentralizing power away from established financial, social and legal institutions. This is why the concept of decentralization has its origins in the cypherpunk movement which was started by nonconformists who envisioned the power of cryptography to give individuals independence. The block chain makes the ideal appears more at hand than ever before. But is this a possibility or even desirable? Influencers Email  id list

Recalling our previous example there are two issues that traditional institutions attempt to resolve for car owners. One is the issue of enforcing ownership, or in essence stopping theft. Another is to ensure the security of exchanges and preventing the victim from being scammed when they sell. In order to determine how intelligent property is compared to current system, we need to consider not only the efficiency of things when everything goes well however, equally important how disastrous things can become when things go wrong. Influencers Email lists
The security challenge in real-world settings

Protection against all forms of theft — vehicles and art, money etc. — is a matter of prevention, detection , and correction. Security measures that prevent theft attempt to prevent theft before it occurs while detection systems ensure that theft is detected so that correction measures are taken to repair the harm caused by the theft as well as to penalize the culprit (which could be an effective deterrent for theft). Alarms and car locks are preventive devices, and GPS tracking devices (such like LoJack) are a great aid in identifying the theft as well as aiding law enforcement in recovering the vehicle that was stolen. The main point to consider is that the lock in your car is one tiny piece of deterrence against theft of cars that is part of a complex system that includes insurance companies, police and courts. If you live in an unregulated environment the car lock itself isn’t much an effective deterrent to theft. If you left your car unlocked on the streets would guarantee that it’s likely to be taken away.

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Influencers Email database free download

The model we’ve observed for smart property is based upon preventive systems. We have been able to attain decentralization because we believed that possession is equivalent to ownership. Owning the car is basically similar to having the private key that corresponds to the specific transaction that is on the block chain. However, this control mechanism is not a good substitute for our current system that is institutionalized, and we’ll show. Influencers Email  database

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If we can reduce ownership to security of private keys, we raise the risk of digital security that is a challenging issue because humans are vulnerable. Programmers have been trying to create code that is bug-free for a long time, but this is still a challenge. The designers of cryptosystems have tried for years to help people who are not technical to use their private keys in a manner that is resistant to theft as well as accidentally losing keys without much advancement. If the decentralization model is based on private keys in a large part the possibility is that cars could be taken through malware or attacks of phishing, and the loss of keys could make your car the size of a brick. While there may be fallback mechanisms in place to deal with the Influencers Email business database possibility of such incidents but these mechanisms will eventually tend to pull us back towards centralization and intermediaries, slashing away at the advantages that the decentralized system we had hoped for. Influencers Email  id list

Another aspect of property transfers that is primarily human-centric is the resolution of disputes that could arise regarding the sale’s terms as well as other elements of the sale. In the real world, when the parties are unable to reach an agreement, the matter is eventually brought to the court, in which a judge will meticulously scrutinize every bit of evidence, testimony and written documents to arrive at an unambiguous decision regarding the legality and legality of the transaction. It’s tempting, especially for those who are technical to view the law as the set of logic guidelines or algorithmic rules that give a definitive decision. But the fact of our legal system is, not only are contracts and laws ambiguous in their language, but they are also dependent on human interpretation and discretion. That is away from simple logic rules. This isn’t a problem. It allows the resolution of issues that are more complicated than the ones anticipated by the people who wrote the law. Influencers Email lists
To highlight the mismatch between the security characteristics that are derived from the model that is decentralized and the security features we really need we will revisit the prior instance of crowd-funding that was decentralized. We observed a method to ensure that entrepreneurs can’t cash out his investments until contributions amount to a pre-determined amount. But this does not stop entrepreneurs who have successfully raised funds from taking the funds! Even with an enacted central model there have been numerous frauds reported on crowd-funding websites that have resulted in lawsuits. If entrepreneurs could be anonymous and have no deterrent from the risk that they could be sued the issue will likely to get more serious. It’s difficult to imagine there would be a solution in the form of technology to this issue. It is a case in which technology can only solve only a tiny portion of the issue, and in truth, it is not the most intriguing part of the issue.

In summary, the intriguing issues with smart property appear to be social issues and issues that occur when things go wrong. Technology can guarantee an efficient transaction in which all parties are pleased however it’s not well-equipped to resolve difficult disputes.

The advantages and disadvantages of smart property buy Influencers Email  database

According to research smart property can be a problem for disaggregating the elements of a system which traditionally require human involvement. Automation may even cause more difficulty because it isn’t able to compose effectively with mediation or other processes when they are added on later on. Additionally, it can cause new types of issues that require security software as well as physical security in the instance of a vehicle.

These are in a sense cartoon representations of what a complete proposal for smart property could appear like. There are many proposals within the Bitcoin community are more nuanced, however, even in our basic scenario, we can recognize the benefits and drawbacks of smart property.

The primary benefit of smart properties is the ease of the transfer of ownership and the ability to do it anytime, from any location. If you sell items that are that are less valuable than cars such as an electronic device or smartphone disputes are less likely to go to court, consequently, nothing is lost in this respect. In these cases Atomic transactions can be an excellent security measure. Influencers Email lists

Block chains that are smart property can also offer greater privacy and sometimes even complete anonymity. While we’ve been arguing that it can make dispute resolution more difficult and privacy, it is also useful in a society in which consumers’ data is utilized by businesses using methods that are not visible and most likely not intended by the person purchasing the goods. In certain situations it may be necessary for the parties involved in the transaction not to reveal their names, something that is not feasible with a central intermediary model. buy Influencers Email  database

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In addition, the decentralized model permits mediators to be selected. Even if we’re content in the system of law most disputes are handled through private firms such as Visa and PayPal in a closed-door manner, using methods that are difficult to examine. With an alternative method in which mediation is
Open the market to competitors, and we could possibly bring greater transparency and oversight for the public in the process.

Crypto is a state-owned company and the great opportunity

There is a striking connection between the rise of modern-day state institutions and objectives of the technology that we have described within this section. As societies have grown from small groups and tribes governments have faced the issue of providing secure commerce as well as other interactions between people who are not familiar. The methods could be different, but the end goal is to achieve a common goal. Influencers Email 

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Although a vision of maximalist decentralization may involve removing the state, it’s not a viable option especially when people who are a part of our democracy also want one. But, decentralization by technology isn’t required in opposing the government in any way. Actually, it can be mutually advantageous. For instance, with that the parties are well-known transfer of property that is smart can be made using the block chain for effective transfers while still utilizing the court system in the event that there is disagreement. We believe the biggest potential for blockchain technology is in implementing decentralization to can enhance the function of the state instead of attempting to replace the state. Influencers Email business database

It’s tempting to think that things will become dispersed simply because technology is there. However, in reality there must be an economic motive that is compelling for decentralization, like a regulations by the government that are particularly difficult or inefficient or power imbalance that can cause the abuse of power. In one instance individuals in different African nations have embraced mobile phone minutes as a kind of currency that isn’t under the state’s control and is less susceptible to the abuses of power. buy Influencers Email  database

To summarise, we’ve provided the decentralization technical framework in this chapter. We’ve as well, we have examined the motivations for decentralization. We suggest that you look for compelling examples of decentralization, especially ones that can be integrated into existing regulations and legal practices. Influencers Email lists

A few people are thrilled about Bitcoin because of its underlying technology. Others are excited by its potential commercial benefits as well as its political and social implications. There are many reasonable people who disagree with these two points however we hope that this book has convinced you that , technologically, Bitcoin is deep, innovative, fascinating and based on solid fundamentals. Beyond Bitcoin there’s an intriguing world of alternate cryptocurrency designs which we’re only beginning to look into, some that could eventually become more important than Bitcoin itself.

We started with Bitcoin due to our belief in the capabilities of its technology and consider it to be a significant part of the other aspects of the computer science field. Although we’ve discussed how revolutionary technology may struggle to challenge traditional institutions, we think that over the long term it will be possible to discover new, practical and economically beneficial things that are related to the technology of cryptocurrency. If your focus is predominantly commercial, you’d be better to understand the fundamental technology. Understanding its capabilities and limitations can help you stay ahead of the market’s hype cycle. marketing database Influencers Email

In the end, we’ll offer some thoughts on where we’re headed. One of the greatest aspects of decentralization is it’s a fantastic platform for learning and experimentation. Everyone can install and examine the Bitcoin block chain or develop their own applications using it. We’re hoping you’ll use these opportunities. Influencers Email lists

We’ve designed a range of online content that are a complement to this book. Our Coursera course contains video lectures that reflect the content of this book. The course also includes quizzes as well as an array of programming assignments. Participating in the course will provide access to the forums, which will provide you with an online community of learners who are like-minded.

The first draft of this book is completed but it’s still a work in development. We’re keeping track of developments in areas like Ethereum and, whenever an area of scientific research is created around a new subject We will publish additional chapters. Go to our course’s website!

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Similar to autres markets, it is easy to think that with time, certain entities are likely to establish themselves as trustworthy arbitrators. They will then have an incentive to conduct their arbitrage correctly to preserve their prestigious reputations. However, there is always the possibility that they’ll steal lots of moneymuch more than what their reputation is worth by manipulating the odds. This is a risky proposition in an investment market that is based on predictions. For instance, in the World Cup market, the arbitrator might claim that Argentina triumphed even though the fact is that they lost. In the event that an arbitrator been betting heavily in Argentina themselves, they could make enough money from it to justify destroying their reputation. Influencers Email 

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Do we need an arbitration system that is less centralized? One possibility is to assign several arbitrators, and the decision is by the majority. There are other ideas that are that are based on votes — whether by everyone who has share in the marketplace or by the miners in the currency. These kinds of proposals typically include penalizing voters who vote in opposition to the popular vote. There are numerous issues that could arise from these proposals and we don’t even know what they’ll do in actual practice. Influencers Email business database

Another issue is that sometimes, reality is complex. Apart from the problem that arbitrators lie, it could be legitimate disagreements about the outcome of an occasion. Our favourite example comes taken from 2014’s Super Bowl. There’s a custom at the Super Bowl of the winning team pouring a bucket of Gatorade on their coach. It is popular to bet on the hue of Gatorade that the team winning will use to celebrate the victory This betting has been going on for the past more than two years. In 2014, bets were placed in Yellow, Orange, and the different colors in Gatorade. However, that year’s unexpected outcome made it difficult for the gamblers to make a decision. After the Seahawks triumphed, they poured the orange Gatorade onto their coach Pete Carroll. After a while some other players were able to repeat the act and pour another bucket of Gatorade on Carroll. The first bucket was filled with orange Gatorade while the second bucket was filled with yellow Gatorade. Influencers Email lists

Perhaps the sequence of puzzles could be generated automatically, but this seems difficult as well. One idea might be to take a large set of hash functions (say, the 24 SHA‐3 candidates which were not broken) and use each for six months to one year, too short of a time for hardware to be developed. Of course, if the schedule were known in advance, then the hardware could simply be designed just in time to ship for the time each function was being used. marketing database Influencers Email

The ASIC honeymoon. The lack of ASICs for X11 so far, even though they are clearly possible to build, demonstrates a potentially useful pattern. Because no altcoins using X11 have a particularly high market share, there simply hasn’t been a large enough market for anybody to build ASICs for X11 yet. In general, designing ASICs has very high upfront costs (in both time and money) and relatively low marginal costs per unit of hardware produced. Thus, for new and unproven cryptocurrencies, it is not worth making an investment to build hardware if the currency might fail before the new hardware is available for mining. Even when there is a clear market, there is a time delay before hardware units will be ready. It took over a year for the first Bitcoin ASICs to be shipped from when they were first designed, and this was considered to be lightning fast for the hardware industry. Influencers Email lists

Thus, any new altcoin with a new mining puzzle is likely to experience an ASIC honeymoonduring which time GPU and FGPA mining (and potentially CPU mining) will be profitable. It may not be possible to stem the tide of ASICs forever, but there is perhaps some value in making it appealing for individuals to participate in mining (and earn some units of the new currency) while it is bootstrapping. Influencers Email consumer  database

Arguments against ASIC‐resistance. We’ve seen that it may be impossible to achieve ASIC‐resistance in the long run. There are also arguments that it is risky to move away from the relatively proven SHA‐256 mining puzzle towards a new puzzle that might be weaker cryptographically. Furthermore, SHA‐256 mining ASICs are already being designed at close to modern limits on hardware efficiency, meaning the exponential growth period is probably over and SHA‐256 mining will therefore offer the most stability to the network.

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Finally, there is an argument that even in the short run ASIC‐resistance is a bad feature to have. Recall from Chapter 3 that even if there is a 51% miner, many types of attack aren’t rational for them to attempt because it could crash the exchange rate and decimate the value of the miner’s investment in hardware since the bitcoins they earn from mining will be worth much less. Influencers Email 

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With a highly ASIC‐resistant puzzle, this security argument might fall apart. For example, an attacker might be able to rent a huge amount of generic computing power temporarily (from a service such as Amazon’s EC2), use it to attack, and then suffer no monetary consequences as they no longer need to rent the capacity after the attack. By contrast, with an “ASIC‐friendly” puzzle, such an attacker would inherently need to control a large number of ASICs which are useful only for mining the cryptocurrency. Such an attacker would be maximally invested in the future success of the currency. Following this argument to its logical conclusion, to maximize security, perhaps mining puzzles should not only enable efficient mining ASICs to be be built, but be designed such that those ASICs are completely useless outside of the cryptocurrency! Influencers Email customers database


In Chapter 5 we discussed how the energy consumed (some would say wasted) by Bitcoin mining, referred to as negative externalitiesby economists, is a potential concern. We estimated that Bitcoin mining consumes several hundred megawatts of power. The obvious question is whether there is some puzzle for which the work done to solve it provides some other benefit to society. This would amount to a form of recycling and could help increase political support for cryptocurrencies. Of course, this puzzle would still need to satisfy several basic requirements to make it suitable for use in a consensus protocol. Influencers Email lists

Previous distributed computing projects. The idea of using idle computers (or “spare cycles”) for good is much older than Bitcoin. Table 8.3 lists a few of the most popular volunteer computing projects. All these projects have a property that might make them suitable for use as a computational puzzle: specifically, they involve some sort of a “needle in a haystack” problem where there is a large space of potential solutions and small portions of the search space can be checked relatively quickly and in parallel. For example, in SETI@home volunteers are given small portions of observed radio signals to scan for potential patterns, while in volunteers are given a small range of potential secret keys to test.

Volunteer computing projects have succeeded by assigning small portions of the solution space to individuals for checking. In fact, this paradigm is so common that a specific library called BOINC (Berkeley Open Infrastructure for Network Computing) was developed to make it easy to parcel out small pieces of work for individuals to finish. Influencers Email consumer  database

In these applications, volunteers were motivated mainly by interest in the underlying problem, though these projects also often use leaderboards for volunteers to show off how much computation they have contributed. This has led to some attempts to game the leaderboards by reporting work that wasn’t actually finished, requiring some projects to resort to sending a small amount of redundant work to detect cheating. For use in a cryptocurrency, of course, the motivation is primarily monetary and we can expect participants to attempt to cheat as much as technically possible.

Challenges in adapting useful‐proof‐of‐work. Given the success of these projects, we might attempt to simply use these problems directly. For example, in the case of SETI@Home, where volunteers are given segments of radio observations which they test for statistical anomalies, we might decide that statistical anomalies which are rarer than some threshold are considered “winning” solutions to the puzzle and allow any miner who finds one to create a block. Influencers Email lists

There are a few problems with this idea. First, note that potential solutions are not all equally likely to be a winning solution. Participants might realize that certain segments are more likely to produce anomalies than others. With a centralized project, participants are assigned work so all segments can be analyzed eventually (perhaps with more promising segments given priority). For mining, however, any miner can attempt any segment, meaning miners might flock to try the most likely segments first. This could mean the puzzle is not entirely progress‐free, if faster miners know they can test the most promising segments first. Compare this to Bitcoin’s puzzle, in which any nonce is equally likely to any other to produce a valid block, so all miners are incentivized to choose random nonces to try. The problem here demonstrates a key property of Bitcoin’s puzzle that we previously took for granted, that of an equiprobable solution space. Influencers Email lists

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Next, consider the problem that SETI@home has a fixed amount of data to analyze based on observations taken by radio telescopes. It’s possible that as mining power increased, there would be no more raw data to analyze. Compare this again to Bitcoin, in which an effectively infinite number of SHA‐256 puzzles can be created. This reveals another important requirement: an inexhaustible puzzle spaceis needed. Influencers Email customers database

Finally, consider that SETI@home uses a trusted, centralized set of administrators to curate the new radio data and determine what participants should be looking for. Again, since we are using our puzzle to build a consensus algorithm we can’t assume a centralized party to manage the puzzle. Thus, we need a puzzle that can be algorithmically generated.

Which volunteer computing projects might be suitable as puzzles?. Returning to Figure 8.3, we can see that SETI@home and Folding@home clearly won’t work for a decentralized consensus protocol. Both probably lack all three properties we’ve now added to our list. The cryptographic brute‐force problems taken on by could work, although they are typically chosen in response to specific decryption challenges that have been set by companies looking to evaluate the security of certain algorithms. These can’t be algorithmically generated. We can algorithmically generate decryption challenges to be broken by brute forcing, but in a sense this is exactly what SHA‐256 partial pre‐image finding already does and it serves no beneficial function. Influencers Email consumer  database

This leaves the Great Internet Mersenne Prime Search, which turns out to be close to workable. The challenges can be algorithmically generated (find a prime larger than the previous one) and the puzzle space is inexhaustible. In fact, it’s infinite, since it has been proven that there are an infinite number of prime numbers (and an infinite number of Mersenne Primes in particular). Influencers Email lists

The only real drawback is that large Mersenne Primes take a long time to find and are very rare. In fact, the Great Internet Mersenne Prime Search has found only 14 Mersenne primes in over 18 years! It clearly wouldn’t work to add less than one block per year to a block chain. This specific problem appears to lack the adjustable difficulty property that we stated was essential in Section 8.1. It turns out, however, that a similar problem involving finding prime numbers appears workable as a computational puzzle.

Now, to turn this into a computational puzzle, we need three parameters m,n,and kwhich we will explain momentarily. For a given challenge x(the hash of the previous block), we take the first mbits of xand consider any chain of length kor greater in which the first prime in the chain is an n‐bit prime and has the same mleading bits as xto be a valid solution. Note that we can adjust nand kto make the puzzle harder. Increasing k(the required chain length) makes the problem exponentially harder, while increasing n(the size of the starting prime) makes it linearly harder. This provides fine‐tuning of the difficulty. The value of mjust needs to be large enough that trying to pre‐compute solutions before seeing the value of the previous block is infeasible.

This provides strong evidence that it is possible to make proof‐of‐useful‐work practical in some limited circumstances. Of course, it’s debatable the extent to which finding large Cunningham chains is useful. It’s possible that they may have some applied purpose in the future and they certainly stand as a small contribution to our collective mathematical knowledge. Currently, however, they have no known practical applications. Influencers Email  database free

Permacoin and proof‐of‐storage. A different approach to proof‐of‐useful work is proof‐of‐storage (also sometimes called proof‐of‐retrievability). Rather than requiring a solely computational puzzle, what if we could design a puzzle that required storing a large amount of data to compute? If this data were useful, then miners’ investment in mining hardware would effectively be contributing to a widely distributed and replicated archival storage system. Influencers Email lists

We’ll take a look at Permacoin,the first proposal for proof‐of‐storage for use in consensus. We begin with a large file which we’ll call F.For now, let’s assume everybody agrees on the value of Fand the file will not change. For example, Fmight be chosen by a trusted dealer when a cryptocurrency is launched, much as any new currency needs to agree on a genesis block to get going. This would ideally be a file of public value. For example, experimental data collected from the Large Hadron Collider already consists of several hundred petabytes (PB). Providing a free backup to this data would be quite useful.

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Of course, since Fis a huge file most participants will not be able to store the entire file. But we already know how to use cryptographic hash functions to ensure everybody agrees on Fwithout knowing the entire thing. The simplest approach would be for everybody to agree on H(F),but a better approach is to represent Fusing a large Merkle tree and have all participants agree on the value of the root. Now, everybody can agree on the value of Fand it is efficient to prove that any portion of Fis correct. Influencers Email lists

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As usual, this is a slight simplification of the full Permacoin proposal, but this is enough to understand the key design components. The biggest practical challenge, of course, is finding a suitably large file that is important, public and in need of additional replication. There are also significant complexities if the file Fchanges over time, as well as with adjusting the mining difficulty over time. Influencers Email customers database

Long‐term challenges and economics. To summarize this section, proof‐of‐useful‐work is a very natural goal, but it is quite challenging to achieve it given the other requirements of a good computational puzzle for a consensus protocol. Although at least two examples are known which are technically feasible, Primecoin and Permacoin, both carry some technical drawbacks (primarily longer verification time of purported solutions). Furthermore, both provide fairly minor public benefits compared to the scale of effort we’ve seen levied at Bitcoin mining with millions of dollars worth of capital and megawatts of electricity consumed. Influencers Email  database free

There is an interesting economic argument that the benefit of any proof‐of‐useful‐work should be a pure public good.In economics, a public good is one that is non‐excludable, meaning nobody can be prevented from using it, and non‐rivalrous, meaning the good’s use by others does not affect its value. The classic example is a lighthouse. Influencers Email lists

Some of the examples we discussed here, such as protein folding, might not be a pure public good because some firms (such as large pharmaceutical corporations) may benefit more from increased knowledge about protein folding than others. Essentially, mining would be cheaper for these parties since they are gaining more benefit from the public benefits than others would be.

Nonoutsourceable Puzzles

Let’s turn to another potential design goal for alternative mining puzzles: preventing the formation of mining pools. As we discussed in Chapter 5 and elsewhere, most Bitcoin miners mine as part of a pool rather than independently. This has resulted in a few large pools which together represent most of the mining power. Since each pool is operated by a central pool administrator, some feel this is a dangerous trend away from Bitcoin’s core design principle of decentralization and can compromise its security. Influencers Email  database free

While a mining pool with a majority share is an obvious problem, any large centrally managed pool might implement a non‐default mining strategy and attack the network. Such pools are also a juicy target for hackers to try and compromise to immediately control a large amount of mining power. The pool operators might collude to censor transactions or enforce high transaction fees. At the very least, having most miners in pools also means that most miners aren’t running a fully validating node.

Interestingly, these concerns have an analogy in the realm of voting. It’s illegal in the United States and many other nations for individuals to sell their vote. Arguably participating in a pool controlled by someone else is akin to selling your vote in the Bitcoin consensus protocol. Influencers Email lists

Technical requirements for pools. Recall that mining pools appear to be an emergent phenomenon. There’s no evidence that Satoshi was thinking of mining pools at the time of Bitcoin’s original design. It wasn’t apparent for a few years that efficient pools could be run between many individuals who don’t know or trust each other. Influencers Email business  database free download

As we saw in Chapter 5, mining pools typically work by designating a pool operator with a well‐known public key. Each of the participating miners mines as usual but sends in shares to the pool operator. These shares are “near misses” or “partial solutions” which would be valid solutions at a lower difficulty level. This shows the pool operator how much work the miner is performing. Whenever one of the pool participants finds a valid block, the pool operator then distributes the rewards amongst the pool participants based on the number of shares they have submitted. As we discussed in Chapter 5, there are many formulas for dividing the revenue up, but all mining pools follow this basic structure.

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The existence of pools thus relies on at least two technical properties of Bitcoin. The first is that it’s easy for a miner to prove (probabilistically) how much work they are doing by submitting shares. By choosing a low enough threshold for shares, miners can easily prove how much work they are performing with arbitrary precision regardless of the actual difficulty of finding an valid block. This facet of mining puzzles appears difficult to change, given that we need a puzzle that can be created with arbitrary difficulty. Influencers Email lists

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Second, pool members can easily prove to the pool operator that they’re following the rules and working to find valid blocks which would reward the pool as a whole. This works because the pool’s public key is committed to in the coinbase transaction included in the block’s Merkle tree of transactions. Once a miner finds a block or even a share, they can’t change which public key is the recipient of the newly minted coins. Influencers Email b2c database

Block discarding attacks. There is one weakness in this scheme for implementing mining pools: there is nothing to to enforce that participating miners actually submit valid blocks to the pool manager in the event that they find them. Suppose that there’s a pool member that’s upset with a large mining pool. They can participate in the pool by mining and submitting shares just like normal, but in the event that they actually find a valid block that would reward the pool they simply discard it and don’t tell the pool operator about it.

This attack reduces the pool’s overall mining power as none of the attacker’s work is contributing towards finding valid blocks. However the attacker will still be rewarded as they appear to be submitting valid shares and simply getting unlucky to not find any valid blocks. If the mining pool is designed to be revenue‐neutral (that is, all mining rewards are redistributed back to participants) then this attack can cause the pool to run at a loss. Influencers Email lists

This attack is sometimes called a vigilanteor sabotageattack and is considered a form of vandalism because the attack appears to be costly for both the attacker and the pool. The attacker loses money because every block they discard would have led to some proportion of the block rewards being returned to them. Of course, the attacker still gets rewards for other puzzle solutions that are found. Influencers Email business  database free download

It appears that a rational attacker wouldn’t employ this strategy, since they would lose money without gaining anything tangible. It turns out (quite surprisingly) that there are cases where this strategy can be profitable, as discussed in the box below. But in any case, we want to design an entirely new mining puzzle formulation that ensures this strategy is always profitable.

Sidebar: block discarding attacks between pools. People assumed for years that it can’t be profitable for a participant to discard valid blocks found on behalf of the pool. It turns out this strategy can be profitable if one mining pool uses it to attack another. This was proposed apocryphally many times and first thoroughly analyzed in a paper by Ittay Eyal in 2015.

Let’s consider a simple case: suppose two mining pools, A and B, each have 50% of the total mining capacity. Now suppose B uses half of its mining power (25% of the total capacity) to mine as a member in pool A, but discards all blocks found. We can show, in a simplified model, that B will now earns 5/9 of the total rewards, greater than the 50% it would earn by mining normally. In this simple case, dedicating half of its mining power to attacking can be shown to be the optimal strategy for pool B. Influencers Email business  database free download

The situation grows more complicated with multiple pools. Block discarding has not been observed in practice on a large scale as of this writing. But it remains possible that in the long run, attacks like this one will throw the viability of large mining pools into question.

Rewarding sabotage. Our design goal is to make it so that miners are incentivized to mine in a pool but not submit valid blocks to the pool manager. Currently, only the pool manager can collect the mining rewards because the manager requires all participants to include a specific public key in the coinbase transaction of blocks they are mining. Proper inclusion can be easily checked in submitted partial solutions. The pool manager is the only party that knows the private key and hence can determine where the newly minted coins go. Influencers Email lists

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But what if we required that all participants also knew the private key (and hence could redirect the funds after mining a block?). To do this, we need a puzzle in which each solution attempt requires knowledge of the private key in the coinbase transaction. We can change the puzzle from “find a block whose hash is below a certain target” to “find a block for which the hash of a signatureon the block is below a certain target.” This signature must be computed using the same public key in the coinbase transaction. Influencers Email leads

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Such a puzzle leaves would‐be pool operators with two untenable choices. They might distribute the private key to all pool participants, in which case any of them can steal all of the funds. Alternately, they can perform the signatures on behalf of pool participants. Computing a signature is orders of magnitude more expensive than computing a hash, however, so in this case the pool manager would be doing the majority of the heavy lifting. It would be better for the pool manager to simply be a solo miner. Influencers Email b2c database

The pros and cons of non‐outsourceable mining. Since this puzzle can’t effectively be outsourced to an untrusted participant, it makes it much more challenging, if not outright impossible, to form a mining pool with untrusted participants. It effectively prevents allpools, even efforts like P2Pool to make a decentralized pool without a pool manager. Influencers Email  database free download

There’s an argument that deploying such a puzzle might perversely lead to morecentralization, not less, because it would discourage small miners from participating due to the high variance they would face. This would leave only large mining operations. Currently, while pools may nominally control a large amount of mining power, it isn’t clear that they can use this to launch an attack without seeing many of their members defect. It remains an open question which risk is worse — that of large mining pools, or of limiting mining to operators large enough to live with a high variance.

The holy grail would be to design a consensus protocol which is “naturally” low‐variance by rewarding miners a small amount for lower‐difficulty puzzles. This would mean miners don’t need to form pools and yet small miners may still participate. Simply decreasing the average time between blocks won’t work — it would need to be decreased by a factor of 1,000 or more for the resulting variance to be equivalent to today’s large mining pools. But then the delay between blocks would be less than a second and the number of stale blocks would be chaotically high. It remains an open question if there is an alternate version of the consensus protocol which would enable easier mining puzzles without requiring near‐instantaneous broadcast of all solutions. Influencers Email lists

Proof‐of‐Stake and Virtual Mining

To wrap up this chapter, let’s look at the idea of replacing computational puzzles with virtual mining. This term refers to a disparate set of approaches but they all have in common that they require only a small expenditure of computational resources by participating miners.

Closing the loop on mining. As a thought experiment, suppose Bitcoin or another cryptocurrency becomes the dominant form of payment globally. Miners would start with some initial holding of cryptocurrency, use it to purchase mining equipment and electricity, consume these resources, and in the process, acquire new cryptocurrency in the form of mining rewards. This process continually burns energy and raw materials.

Once mining hardware becomes a commodity and electricity is a commodity (as it generally already is), no miner would have a significant advantage over any other miner in terms of how efficiently they could convert their initial cryptocurrency holdings into mining rewards. Barring minor variations in efficiency, whoever invests the most into mining will receive the most rewards. Influencers Email  database free download

The basic question motivating virtual mining is: what would happen if we removed the step of spending money on power and equipment? After all, this process is primarily used to prove who has invested the most in mining. Why not simply allocate mining “power” directly to all currency holders in proportion to how much currency they actually hold?

Recall that the original goal of Bitcoin mining was to enable a form of voting on the state of the block chain, with miners with more computing power gaining more votes. We could instead design our “voting” system so that votes are determined by how much currency one currently holds.

Advantages of virtual mining. The primary advantage of this approach is obvious: it removes the wasteful right half of the mining cycle from Figure 8.5, leaving us with a “closed” system as shown in Figure 8.6. Influencers Email lists

In addition to simplicity, this approach would dramatically reduce Bitcoin’s environmental footprint. It wouldn’t reduce energy consumption to zero, because miners will always have to expend some computational resources to communicate with the network and validate. Some virtual mining