Energy Inefficiency Of Bitcoin
Bitcoin is energy inefficient. Energy consumed for 1 bitcoin transaction in November 2017 could power a house in Europe for a month or a house in USA for two weeks. At 0.13% of global power consumption, Bitcoin consumes as much power as countries like Nigeria and Oman.
Global Bitcoin mining represents a minimum of 77KWh of energy consumed per Bitcoin transaction. The energy costs of the network stand in stark contrast to payment systems that have the luxury of working with trusted counterparties. E.g. Visa takes about 20000 times less energy.
What's the power used for? To secure the network and deter attacks on the network. What if there was an alternative energy-efficient way? What if the alternative was also scalable? Bram Cohen thinks he may have an answer. That's right, the guy who authored the peer-to-peer (P2P) BitTorrent protocol.
Chia Network – PoSpace + PoTime
Cohen has started a new company known as Chia Network, which is to launch a cryptocurrency based on Proof-of-Space(PoSpace) underpinned by Proof-of-Time(PoT). Chia seeks provide a greener, accessible solution to the energy-intensive, ASIC centralized Bitcoin mining.
PoSpace is not such a novel idea. In PoSpace, either the miner allocates a portion of disk space rather than CPU/GPU power to solve puzzles or, as in a similar concept Proof-of-Storage, by receiving and storing files and providing proof that the file was stored. However, for the reason that miners have nothing at stake and because mining is comparatively cheaper, this encourages bad actors.
In earlier implementations of PoSpace, the network was susceptible to grinding attacks which slowed down rate of propagation. Although later versions implemented a highly intricate technique known as ‘graph pebbling' and required a commitment from the miner to the blockchain before the miner could start mining. These implementations were vulnerable to Hellman time-memory trade-off attacks.
“People had previously come up with these pebbling algorithms which kind of work, but they are really complicated and a little bit ugly. They also have this other problem that there's not a single canonical representation of a winning thing; you can twiddle it, and that causes a lot of problems elsewhere in the system. The idea is to resurrect the nice beautiful simple approach but making it so that the Hellman attacks don't work anymore,” says Cohen. How does Chia more reliably solve double-spending and address network security? That's where PoTime comes into play.
The prover holds a file of a certain size greater than is required by the verifier. The verifier challenges the prover to show that the file was stored. The security requirement states that a cheating prover who only stores a file significantly smaller is either rejected or is forced to invest a significant cost of computation equal to the prover's cost of initialization.
A network of full nodes ‘farm' and hold a list of pending transactions. After the PoSpace phase, the three best PoSpace results are then propagated to the network, where dedicated PoTime servers start working on them. PoT buffers potential attacks by malicious ‘farmers’. Once the PoTime servers validate the results, it is then broadcast to the network as a fully validated block and the process repeats as further blocks are built on top. The better the PoSpace is, the shorter the subsequent PoT validation.
With only a handful of PoT servers running, Cohen is all to aware of the source of centralization in the Chia proposal, “The worry is that it might be possible to get meaningful return on investment on faster proofs of time at such massive budgets that it does a fair amount of counteracting the reductions in wasted resources which proof of space plus proof of time (PoST) provide. The party who has the fastest PoT is also a major potential source of centralisation in the system.”
However, he also points out that ‘there is no direct incentive in the protocol for doing PoTime' as it requires co-ordination with whoever has the space. Proofs of space will be made non-outsourceable, so trying to run a for-profit pool suffers from the problem that clients can pretend to participate in the pool but if they happen to win a block they can just keep it for themselves and not give it to the pool.
Allaying fears of centralization therefore is the fact that in the event that there are a handful of powerful PoT servers which always runs the best PoSpace for every block, they would only be helping the network as a whole rather than exerting undue influence over the system.
Chia Network aims to do some early sales of Chia in Q2 2018 and go ahead with the full launch by the end of 2018.