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Biggest blockchain problem

Biggest blockchain problem
« on: 05 July , 2019, 00:52:50 am »
Hi everyone,

My name is David and I would like to start a debate about the biggest problem of Blockchain mining, taking Bitcoin as example. As we know, Blockchain is a decentralized and distributed network and any electronic device connected to this network can process transactions and start earning bitcoins. The more computing capacity a device has, the more likely it is to receive a reward. The devices which are used to get bitcoins are called miners (a group of miners is known as pool).

Imagine a lot of powerful computers, and now think about how much they pollute, the materials, the electricity and ventilation needed. Do you think is worth it to keep mining as we are actually doing?

 ;D Do not hesitate to leave your opinion, I will be waiting for your comments. ;D

David Corral Pazos

Re: Biggest blockchain problem
« Reply #1 on: 07 July , 2019, 14:23:55 pm »
Good morning David,
I also think is quite astonishing how a cryptocurrency such as Bitcoin can consume that amount of electric energy and produce an important and considerable increment of pollution in some countries. That’s why I also think we should discuss if mining is the right method to develop Bitcoin or we should find some other solutions to the problem we are facing.

After reading several articles I have arrived to the following conclusions which could solve the main problem:

- Change the consensus mechanism: Bitcoin uses Proof of Work to determinate whether a transaction is valid or not. This method consists on finding the result of mathematical problems, where miners try to find the Nonce (random and unique value of each block) of the block they want to add to the chain. To find this value they must use a lot of electrical power and powerful computer equipment to carry out these operations.
However, there is an alternative, Proof of Stake (PoS), which is based on the amount of coins stored in the system (rewarding those who are interested in the system development and expansion).
The necessary resources are smaller since the calculations are simpler and enough to demonstrate the possession of a certain percentage of virtual coins.
- Eco-friendly cryptocurrency: Virtual coins that work with renewable energy sources. A clear example is SolarCoin, a cryptocurrency that works through electricity from photovoltaic solar energy.
https://solarcoin.org/
- Hardware that requires less electricity and is less polluting: These are advanced, next-generation hardware accelerators that take up less space and operate at lower temperatures.
The American company Intel is working on the development of these devices that could reduce the power demand of the Bitcoin network by 35%, reducing, consequently the pollution they release to the air.

I hope you find this useful, if any of you find more possible solutions please let me know.

Best regards,
Manuel Cortés (Spain)

Re: Biggest blockchain problem
« Reply #2 on: 23 July , 2019, 17:41:24 pm »
Hi Manuel,

Before starting, thank you very much for spending your time looking for that information. I want to say that I agree with almost everything you have said. You are absolutely right when you talk about finding specialized hardware that requires less electricity and pollutes less. Here you proposed to use the next-generation hardware accelerators, but what about investing money on R&D instead of continue looking for the same improvements? Should we focus on other things?

Secondly, I completely agree with the idea of eco-friendly cryptocurrency, in fact, I think that this is the key point to reduce pollution.

However, I do not agree to change the consensus mechanisms, as this may affect the security of the blockchain a bit. Maybe this difference from Proof of Work to Proof of Stake is not a problem and I am seeing it from a wrong point of view. What do you think?

Hope to read you soon,
David Corral Pazos

Re: Biggest blockchain problem
« Reply #3 on: 24 July , 2019, 18:34:19 pm »
Good afternoon David,

Before trying to answer your questions about the different consensus algorithms and analyze how secure they are, I will try to explain what these processes consist on for everyone who does not know what we are talking about.

Consensus algorithms are what make Blockchain decentralized and secure, they are the base of any network such Bitcoin or Ethereum. These mechanisms are created to achieve reliability in the network when it involves multiple nodes.

Consensus mechanisms basically ensure that the blocks in the chain are always the truth and that there is no mistake, defending the network against adversaries trying to manipulate and modify the system. The work provided by this process is the base for the blockchain’s development, however some of these mechanisms involve a lot of computational energy causing a huge amount of pollution. This is the problem of PoW (Proof of Work). Which was introduced in the previous posts.

Once we understand how do consensus mechanisms work and how can we make sure our Blockchain is safe, we arrive to the point where we ask ourselves: Is it profitable to invest such amount of energy? Could we solve this problem with an alternative consensus mechanism?

This is where Proof of Stake appears and where we all doubt if this could cause serious damage to the network. PoS algorithm uses validators who are chosen based on criteria which includes coin age and economic stake. In this process we do not need as much electricity as we needed with Proof of Work. Could this be the solution?

Changing from Proof of Work to Proof of Stake might scare us and the community because it is an important change that can cause problems and even security issues. But I do not think we have to be afraid of this change, during history we have been afraid of many big changes, we didn’t want to believe earth was round or that it wasn’t the center of the universe, we were scared about what could it suppose. We are now in the XXI century; we don not have to be afraid anymore of these changes. This new consensus will be studied and will be tested to ensure that we can trust it.

One of the facts which makes me feel comfortable with this new consensus mechanism is that back in 2015, Ehereum’s Vitalik Buterin came up with a plan to switch into PoS from the current PoW system. Since then, communities around the world and Vitalik have been studying this process which will probably change Ethereum’s mechanism in 2019.

I hope I have answered your questions, if you do not agree just let me know. This is only my opinion; you might have another perspective.

Best regards :D,
Manuel Cortés (Spain)

Re: Biggest blockchain problem
« Reply #4 on: 25 July , 2019, 14:52:41 pm »
Good afternoon Manuel,

Now, that I have investigated something about the PoS (Proof of Stake) I think I understand it. This consensus algorithm is based on the assumption that those who own more units of a currency, they are the most indicated to bear the responsibility of protection from possible attacks as they are especially interested in the survival and the proper functioning of the network. To do this possible, they will have easier math problems to create new blocks (inversely proportional to the numbers of coins they show they own).

Let’s try now to analyse the advantages and the disadvantages of this consensus algorithm:

  • Advantages: Clearly the main benefit that PoS can provide to blockchain is the reduction of electricity and therefore a reduction of the pollution produced. Also, this consensus reduced centralization risk, as economies of scale are much less of an issue.
  • Disadvantages: Wallets must be connected to the network, which implies that they will be exposed to possible security problems and attacks. Another disadvantage would be de capital difference of the network users, and many people may complain of that and eventually stop using that cryptocurrency. Now imagine for a moment that “rich users” refuse to expose a significant part of their fortunes, they network could become vulnerable easily. The same would happen if the richest user lost his wallet or if he forget his password. Furthermore, It seems to me that many people will not trust the richest users maybe they just want to increase their fortune, being able to reach the 51% in some cases and starting an attack that would be really difficult to recover.

I may be wrong but using the PoS I could get to see a “pay to win” blockchain.

If PoS is really better than PoW, the community will want to incorporate it as soon as possible and even the biggest cryptocurrencies will use it.

What do you think about it? Do you agree?

All the best,
David Corral Pazos

P.S.
I leave here some interesting web pages, papers and videos if someone wants to learn more about this topic, I really recommend them.
https://en.bitcoin.it/wiki/Proof_of_Stake
https://pdfs.semanticscholar.org/0db3/8d32069f3341d34c35085dc009a85ba13c13.pdf?_ga=2.54940907.1796183319.1549914784-2116159134.1549914784
https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ
https://www.youtube.com/watch?v=-C19r0UsYws
https://en.wikipedia.org/wiki/Proof_of_stake
https://blockgeeks.com/guides/proof-of-work-vs-proof-of-stake/

Re: Biggest blockchain problem
« Reply #5 on: 25 July , 2019, 22:02:32 pm »
Hi David, hi Manuel, hi to everyone else,
it's great to see you two guys debating with such great effort. Just reading your posts makes me feel really lazy, the amount of information you have researched is huge. Keep going on like this!
To everyone but David and Manuel: Please join in the discussion and contribute, you and your papers would benefit a lot from the new knowledge! Plus, the discussion would be much more entertaining for me ;)

Keep up the good work, all the best!
Matthias

Re: Biggest blockchain problem
« Reply #6 on: 25 July , 2019, 22:43:28 pm »
Hi Mattias,

I will be quick, I just wanted to thank you for that message. It is amazing to see how a few words can encourage us to keep working. ;D  Lastly, I also want to encourage everyone else to participate in the forum, any information is important to carry out our works. Probably, when you start to debate about these topics, you will get hooked. ;)


Sincerely,

David Corral Pazos

Re: Biggest blockchain problem
« Reply #7 on: 26 July , 2019, 16:11:17 pm »
Good morning David,

I agree with everything you have said, your analysis about de advantages and disadvantages of the Proof of Stake mechanism is totally right.

As you have introduced, PoS is a completely different consensus mechanism, it consists on creating a system which compares the percentage of the asset owned by a validator, rewarding the validator based on the amount of wealth they own in comparation with everyone else. And this huge difference between these two processes involves new advantages and obviously, disadvantages.

We shouldn’t see PoS as a bad or useless method, this new mechanism presents serious problems and disadvantages which should be studied and solved. But until now we have been using a mechanism (PoW) which also presents huge problems, the energy consumption and the 51% attack. You are completely right when you argue that PoS is more vulnerable when we talk about nodes forking the blockchain in their favor and that it is not one hundred percent secure. However, there is always a solution, and if we study the advantages thoroughly, we will observe how they cover PoW’s ones and how they are more beneficial for the network’s development.

You have pointed two of them, we could reduce energy consumption and in consequence pollution, and it could also reduce centralization risk. I will add some more and I will also present a solution for the security issue:

  • Scaling: some scaling solutions such as Sharding on Ethereum actually fare far better on PoS blockchain. This is, in fact, one of the reasons why Ethereum developers are transitioning to PoS from PoW.
  • Security: many people think PoS is less secure, they are not wrong, using this mechanism some nodes could create a bad fork and use the blockchain in their favor. But there is always a solution. Ethereum’s Casper update is intended to solve this problem by bonding validators by putting an ether deposit in a contract. Then, if the validator has voted for multiple chains, they risk losing the deposit, so there is more risk in acting badly.
  • Transparency when using pooling for consensus.

When we analyze both mechanisms, we observe problems in both of them. Proof of Work was great to start with Blockchain and is secure, but its difficulty in scalability and its energy consumption are a barrier for Blockchain’s development. It has been 10 years since PoW appeared, we could consider this mechanism ancient in information technology. And technology involves constant evolution and changes, that’s why consensus mechanism should not be an exception.   

In conclusion, PoW should be changed, maybe PoS is not the right mechanism but we won’t know that until we do not test it. There are also many other processes which could work: proof of burn, proof of authority, stellar consensus protocol…

And it would be a great idea to combine both, PoW and PoS, creating a hybrid consensus mechanism instead o a pure PoS. This way PoS could solve PoW’s scalability and consumption problems and PoW could give the blockchain a secure base.

I hope you find this interesting and we arrive to a great conclusion! What do you think about a hybrid protocol? And about the solution for the security problem? Do you think PoW should be substituted? I encourage everyone who has not talked yet to post some information and discuss with us, it would be great! ;)

Hope to read you soon. Best regards,
Manuel Cortés (Spain)
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Re: Biggest blockchain problem
« Reply #8 on: 26 July , 2019, 21:46:46 pm »
Good afternoon Manuel,

At the beginning, it seemed like an idea that could work, but now, that I have investigated it further, I really love it.

The creation of new blocks is divided into two parts: all active miners (who produce PoW blocks) and stakers (who produce PoS blocks). The blocks should be placed so that PoW blocks are surrounded by PoS blocks and vice versa. I will not go into the topic of explaining how they work because we have already explained it and each one will do the same work they do separately but they are placed in an interspersed way.

The reason I like this mechanism is because it has already been implemented in one of the most important blockchain companies, Aion Network (Here you have his web page if you want any information about them https://aion.network/ ).

Their ideas were pasted on a paper called Aion Unity Consensus WhitePape (you can visit it here for more information https://aionnetwork.github.io/aion-unity_consensus.pdf). The only significant change is the readjustment of some variables in the algorithms but without changing the bases of each one, in addition, these changes do not influence the structure of the blockchain, they just affect the responsiveness, volatility, simplicity and memory.

“Ideally, a difficulty adjustment algorithm should have the following common properties:
Responsiveness – The algorithm should respond quickly to changes in the network hash rate or stake power.
Low volatility – The difficulty should be relatively stable when the network hash rate or stake power is constant.
Simplicity – The algorithm should be relatively simple to implement.
Low memory – The algorithm should not require a memory of many past block timestamps.”

I just want to emphasise in one sentence that they have said and ends with the attack of the 51%: “It would require a combination of hash and stake power of over 100% to dominate the system.” The reason of this is because is much more difficult for an attacker with 51% hash power or 51% stake power to launch a massive attack, as the form choice rule takes both mining and staking into account.

What do you think about this combination? Do you think these changes were necessary?

I hope we have reached an agreement. ;D

Kinds regards,
David Corral Pazos

P.S.
If someone has a different point of view, do not hesitate to share it here.  :D

Re: Biggest blockchain problem
« Reply #9 on: 27 July , 2019, 21:06:03 pm »
Good afternoon David,

I completely agree with you, as I said in my previous message a combination of these two mechanisms could be the solution for the problems they both show. We could solve PoW’s energy consumption and the risk of a 51% attack, and we could also find a solution to PoS’s security issues and malicious forking. The idea would be to capture the benefits of the respective approaches and use them, to balance each other weaknesses.

The information you have posted is totally right, I think the properties you have mentioned are the ones which will make this protocol work and that will actually be the solution for the barriers which are stopping Blockchain’s development.

About the last question you have raised, I maintain my idea that we need this change, we have been supporting Proof of Work for too long, almost ten years since it was created, now we are in 2019 and we can find better and more ecologic solutions. One of the principal reasons that make me have this idea of new methods is that some important Blockchains, such as Ethereum or the one you mentioned, are really looking forward to solving the issues that ancient processes had and focusing their work in new consensus mechanisms.

You have talked about Aion Network, I have also discovered the existence of Decred, a blockchain-based cryptocurrency which uses a hybrid PoW and PoS mining system to ensure that a small group can not dominate the flow of transactions or make changes to Decred without the input of the community. In this system block rewards are split between PoW miners (60%), stakeholders (30%) and the Decred Treasury (10%), which funds the project.
Decred website: https://decred.org/es/ 

I will leave now some links that contain information about this idea of a hybrid consensus also named PoSW (Proof of Staked Work).

Re: Biggest blockchain problem
« Reply #10 on: 27 July , 2019, 22:15:58 pm »
Good afternoon everyone,

Before I begin, I want to say that this message is simply a curiosity and is more aimed at people who have not advanced much in their work.

Did you know that besides PoW (Proof of Work) and PoS (Proof of Stake) there a dozens of other consensus mechanisms out there? Some of them are just small changes of the ones we know so well, other ones are highly experimental and the cryptocurrencies using them are trying to see if they can eventually replace the ones that we know so well.

•   Delegated Proof of Stake: the idea is that stake holders can choose leaders who will vote for us and potentially pass us some of the rewards as well. These leaders can be voted in or out at different times and they produce blocks in a round robin fashion. This process is much more collaborative and competitive and so it’s more centralized and it can operate much faster than traditional approaches. The biggest problem is that whales (richest people) have a lot of power in this approach as they can vote themselves or even their friends.

•   Delegated Proof of Stake (DPoS): this consensus algorithm is similar to voting among board of directors. Token holders vote for a fixed number of nodes, which represent them in verifying and updating the ledger. To encourage greater participation in this election, the network generates a small amount of tokens as rewards. Bitshares (https://bitshares.org/) utilizes this consensus model. DPoS is rather similar to a parliament system. If delegates fail to carry out the responsibilities given to them, such as, failing to update the ledger during their turn, they would be removed and the network would elect new delegates as replacement. Every single client can decide which node to trust. This consensus increases Blockchain’s data processing capability, allowing transactions to be completend within seconds, this speed will be similar to centralized settlement systems such as Visa.

I will not explain more as I think it is not necessary, if you want to keep investigating in this topic, I leave you here some websites that you can visit.

https://medium.com/the-daily-bit/9-types-of-consensus-mechanisms-that-you-didnt-know-about-49ec365179da
https://hackernoon.com/types-of-consensus-protocols-used-in-blockchains-6edd20951899
https://issuu.com/zaarahary/docs/types-of-consensus-algorithms

Best wishes,
David Corral Pazos