Undoubtedly the greatest irony in the blockchain space is that there has never been any confirmation of the “best” consensus model. Bitcoin and Ethereum are widely praised for pioneering the concepts of smart contract platforms and blockchains respectively, but both have also been heavily criticized for their lack of scalability. The scalability challenge is largely due to the fact that they use a Proof-of-work (PoW) consensus approach.
As a result, groups of developers have gathered for years to devise another method to reach consensus among network participants. One that removes the bottlenecks caused by PoW, but still achieves the security of decentralization, while maintaining the right balance to incentivize honest individuals and deter bad people.
To date, dozens of attempts have been made to address this predicament. However, only a few have emerged as the main contenders, namely proof-of-stake (PoS) and delegated proof-of-stake (dPoS).
However, a new horse has just entered the race. A blockchain project called Solana is developing a secure, scalable blockchain that can process up to 50,000 transactions per second on its testnet. How does it achieve this? Adopt a new consensus method, called Proof of History.
Proof of History Explanation
Proof of History (PoH) aims to offload network nodes during block processing by providing a means of encoding time into the blockchain. In a conventional blockchain, reaching consensus by the time a particular block is mined is as much a requirement as reaching consensus on the existence of transactions in that block. Timestamps are important because it tells the network (and any observers) that transactions take place in a particular sequence.
In a PoW scenario, the successful block miner is the first to find the correct nonce, which requires a certain amount of computing power to execute. However, PoH uses a newer coding concept called Verifiable Latency Function (VDF.) A VDF can only be solved by a single CPU core applying a specific set of sequential steps. . No parallel processing is allowed, so it’s easy to determine exactly how long it takes to apply those steps. So the passage of time is obvious.
PoH solves the challenge of time and thus reduces the processing weight of the blockchain, making it lighter and faster. Solana combines PoH with a secure protocol called Tower Byzantine Fault Tolerance (BFT Tower), which allows participants to contribute tokens so that they can vote on the validity of the PoH hash. This protocol penalizes bad actors if they vote in favor of a fork that doesn’t match PoH records.
Furthermore, Solana implements proof-of-stake (PoS) as a means of determining who can participate as block validators.
Proof of History compared to its predecessors
So what is the difference between Proof of History and its predecessors?
There are some similarities between Proof of Work and Proof of History. Primarily, both methods rely on a definite cost of computing power to generate blocks or hashes as known in PoH.
Like Bitcoin and most other PoW blockchains, Solana also uses the SHA-256 algorithm. This may raise the question of whether ASICs can significantly speed up the resolution of VDF functionality in PoH. Solana believes this should not be a challenge and that the processing power of most ASICs will be within an acceptable range of what EDT is available to the wider network.
Because PoH removes the burden of timestamping from the network, resulting in a much faster, lighter blockchain than anyone has been able to achieve so far using PoW. Incentive mechanisms are protected by association with the BFT Tower.
Proof of Stake (PoS) is the long-promised solution for Ethereum scalability. In PoS, network participants contribute tokens for a chance to be the miner of the next block and receive associated rewards. However, PoS comes with a significant challenge known as “nothing at stake”. In a PoW blockchain, a miner can only mine on one chain at a time, not on the fork. However, in PoS, a miner can stake their tokens on various forks of the same blockchain.
In Ethereum, which will implement PoS in 2020, this challenge is overcome by introducing a penalty for miners voting on invalid chains. Vitalik Buterin has also previously suggested a second solution of penalizing anyone who votes two different versions of any given block.
The PoH protocol does not prevent malicious actors. As such, Solana implements the BFT Tower to offer assurances to network participants that bad actors will be penalized by having their stakes “slashed” if they see them voting against PoH.
PoS is also vulnerable to a long-range attack whereby earlier participants can hijack the chain by disputing blocks generated by later participants. The BFT Tower prevents such attacks by validating blocks that have received the votes of more than two-thirds of the network.
Furthermore, the block production time is only 400 milliseconds, and the recovery time doubles every subsequent 400 m/s interval. Therefore, after about 12 seconds, the time to return to the network will last decades.
Delegated proof of stake (dPoS) is used by EOS and others to achieve faster throughput by delegating block production to a small number of network participants. These block producers are elected by token holders. In EOS, there are only 21 block producers that control the network.
Challenges appeared almost immediately after EOS launched. Having only 21 block producers means that the network is highly centralized. Furthermore, there is a risk that voters aggregate together to try to manipulate block producer elections in their favor, as EOS has been alleged. The protocol relies solely on votes to elect block producers who will act for the benefit of the network.
In contrast, the PoH/BFT Tower combo will deter bad actors by “slashing” their stakes if they vote against this consensus protocol. This approach enhances security compared to dPoS.
While the underlying technology is somewhat complex, PoH combined with BFT Tower could prove to be the “dream” consensus protocol blockchain has been waiting for. It will need to fulfill its promise on the Solana mainnet first, then perhaps others will follow.
Bitcoin Magazine | Cryptoslate
Follow the Twitter page | Subscribe to Telegram channel | Follow the Facebook page