From the current background of the crypto market...
Nakamoto-style blockchains, such as Bitcoin and Ethereum, combine the longest-chain fork-choice rule with a proof-of-work (PoW) mining puzzle. These systems are provably secure, with respect to safety and liveness, given an honest majority of miners. Unlike legacy Byzantine Fault Tolerant (BFT) consensus algorithms, participation is both permissionless and scalable. These properties are the standard against which all new blockchain consensus protocols are measured. Unfortunately, the security afforded by PoW comes at a massive cost in electricity. Collectively, miners on BTC and ETH consume the energy budget of a medium sized country, with these numbers steadily increasing as more capital flows into the system. This raises the critical question: Is there a way cryptocurrency can reach wide scale adoption as well as saving resources?
Moreover, while mining was originally envisioned as a democratic and egalitarian process, as expressed by 1-CPU-1-vote, it quickly became a highly commoditized and centralized enterprise. Today participation in Bitcoin mining instead follows 1-ASIC-1-vote, assuming a miner also has access to low cost electricity. Ethereum mining sought to circumvent this by adopting 1-GPU-1-vote, but this too has proven susceptible to special purpose hardware and still has the tendency to concentrate in regions with low cost electricity. This raises another key question of whether or not existing cryptocurrencies are actually decentralized, or if we have simply substituted one financial institution for mining pools.
These challenges have served as a rallying cry for a diverse group of hackers, researchers, and engineers who have sought to design a sustainable blockchain that holds true to Nakamoto’s vision for a more democratic and decentralized future. The most well-known solution to this problem is proof-of-stake (PoS), which employs a system of virtual mining based on one’s wealth, under the adage 1-coin-1-vote. While PoS clearly solves the sustainability problem, it does not hold true to Nakamoto’s vision. It instead reflects a permissioned and plutocratic alternative, which also exhibits strong tendencies towards centralization. In fact, PoS systems serve to magnify the existing wealth disparity in cryptocurrencies, which are already significantly larger than historically high disparities in global fiat wealth distribution, effectively serving to make the rich even richer.
What is instead needed is a cryptographic proof system based on an underlying resource that is already massively distributed and which does not lend itself to special-purpose hardware. Thus the appearance of proof-of-capacity (PoC) , which replaces compute-intensive mining with storage-intensive farming, under the maxim 1-disk-1-vote. Disk-based consensus seems like an obvious choice, as storage hardware has long been commoditized, consumes negligible electricity, and exists in abundance across end-user devices. As it turns out, implementing a PoC such that it does not devolve back into PoW, without resorting to a permissioned model, is highly non-trivial, as witnessed by the paucity of live chains to date. Moreover, all existing PoC blockchain designs fail to address a critical mechanism design challenge, to which we turn next.
...to the Farmer's dilemma
In any PoC blockchain, the farmers are incentivized to allocate their storage resources towards consensus. This against the desire for all full nodes to reserve storage for maintaining both the current state and history of the blockchain, therefore led to a challenge to farmers: do they adhere to the desired behavior to save the state and history, or do they maximize their own rewards? When faced with this farmer’s dilemma rational farmers will always choose the latter, becoming light clients, while degrading both the security and decentralization of the network. This implies that any PoC blockchain would eventually consolidate into a single large farming pool, with even greater speed than has been previously observed with PoW and PoS chains.
In any Nakamoto-style blockchain, a new consensus node must synchronize the chain state from genesis. If a large fraction of nodes stores the history, the network may be considered decentralized. However, as time goes by and the history grows, the storage burden on all full nodes grows as well, and some nodes may choose to prune the history, instead only storing the current state of the chain. If full nodes do not store the history, new nodes must instead rely on third-party data stores for initial synchronization, resulting in a more centralized network. In a PoC blockchain farmers have nothing to gain by storing the history and can even lose block rewards, especially as the more history grows, the more consuming of disk space.
In order to extend the valid chain and collect fees for valid transactions, a farmer must maintain the memorized state of the chain, thus consuming more disk space. Furthermore, all farmers are also required to compute the state transition for each new block as part of the ongoing verification process, imposing a non-negligible computational overhead, which conflicts with the desire for farming to be a lightweight task. The farmer’s dilemma then will make the well-known verifier’s dilemma even worse, by further raising the opportunity cost of verification.
Farmer can instead join a trusted farming pool, whereby they delegate transaction verification and block proposing functions to an operator, while the farmer focuses solely on evaluating the block challenge against their plots . This has drastically reduced the computational overhead required to participate in consensus. When a farmer finds a valid solution to the block challenge, they send it to the pool operator, who forges the new block in return for a portion of the block reward. As long as the fee is lower than the opportunity cost of local block production, a rational farmer would always choose to join a pool. In PoW blockchains this choice is largely dictated by a desire for a smoother reward function, since, unlike joining a farming pool, joining a mining pool does not increase one’s total rewards.
The problem with this model is that it is not decentralized. Although the actual consensus hardware is highly distributed, the operators still present a point of centralization, more akin to validators in delegated or nominated PoS protocols. However, PoS systems at least provide strong penalties for misbehavior, which have worked in practice so far. The honest majority farmer assumption becomes an honest majority operator assumption. If that assumption does not hold, most users will be unable to distinguish between valid and fraudulent transactions which appear in the longest chain, allowing operators to create coins out of thin air or spend farmer and user funds at will.
Farmers, therefore, are now seeking of a network which can solve the farmer’s dilemma without sacrificing the security or decentralization of the network, include 4 problems:
- To prevent farmers from discarding history.
- To ensure the history remains available, farmers form a decentralized storage network, which allows the history to remain fully-recoverable, load-balanced, and efficiently-retrievable.
- To relieve farmers of the burden of maintaining the state and performing redundant computation
- To ensure executors remain accountable for their actions
For concreteness, Subspace Network aims to periodically commit to the state of all accounts within the block header within the Ethereum model of a fully-programmable, account-based blockchain. The network proposes many techniques that could significantly affect any Nakamoto-style blockchain.