Bitcoin: a new Proof-of-Work system with reduced variance

Proof-of-Work (PoW) is a popular consensus protocol used by Bitcoin since its inception. PoW has the well-known flaw of assigning all the reward to the single miner (or pool) that inserts the new block. This has the consequence of making the variance of the reward and thus the mining enterprise risk extremely high. To address this problem, Shi in 2016 proposed a theoretical algorithm that would substantially reduce the issue. We introduce a variant of Proof-of-Work that improves on Shi's idea and can be easily implemented in practice. In order to insert a block, the network must not find a single nonce, but must find a few of them. This small change allows for a fairer distribution of rewards and at the same time has the effect of regularizing the insertion time of blocks. This would facilitate the emergence of small pools or autonomous miners

Fault Independence in Blockchain

Byzantine Fault-Tolerant (BFT) protocols have been proposed to tolerate malicious behaviors in state machine replications. With classic BFT protocols, the total number of replicas is known and fixed a priori. The resilience of BFT protocols, i.e., the number of tolerated Byzantine replicas (denoted f ), is derived from the total number of replicas according to the quorum theory. To guarantee that an attacker cannot control more than f replicas, so to guarantee safety, it is vital to ensure fault independence among all replicas. This in practice is achieved by enforcing diverse configurations of replicas, i.e., each replica has a unique configuration, avoiding f fault compromises more than f replicas. While managing replica diversity in BFT protocols has been studied in permissioned environments with a small number of replicas, no prior work has discussed the fault independence in a permissionless environment (such as public blockchains) where anyone can join and leave the system at any time. This is particularly challenging due to the following two facts. First, with permissionless environment, any one can join as a replica at any time and no global coordinator can be relied on to manage replica diversity. Second, while great progress has been made to scale consensus algorithms to thousands of replicas, the replica diversity cannot provide fault independence at this scale, limiting practical and meaningful resilience. This paper provides the first discussion on the impact of fault independence on permissionless blockchains, provides discussions on replica configuration diversity, quantifies replica diversity by using entropy, and defines optimal fault independence.Comment: Disrupt Track of DSN 202

Post Crisis: The Future of Cryptocurrency Against the U.S. Dollar

There have been many economists who predicted prior to the pandemic, a rising  surge in the cryptocurrencies in the future if financial activities especially when new entrants start to enter the market. Due to the volatility in cryptocurrencies since its creation in 2009, It is paramount to keep track of this somewhat recent effect on the financial market. Bitcoin, one of the cryptocurrencies was said to be created to mitigate against the effect of the financial crisis of 2008. To some extent, many believed it to have done its job. This study focuses on how the cryptocurrencies have fared against the dollar and what the future holds for it during this coronavirus pandemic. Ofcourse, the crisis might have little effect on mortgage credits, business or broadly, the financial system but due to the rising use and price of the cryptocurrency, it is obvious this might shake or trigger the financial economy. A survey research design was adopted consisting of 50 bank staff in San Angelo, Texas. A mean score rating method was used to analyze the data and the responses, while in addressing the hypothesis, the chi-square was used to test the effect it has had on the dollar. The results showed that the effect of the cryptocurrencies against the dollar might be significantly low in the future. It implies that despite the expected increase in the cryptocurrencies during “lockdown”, cryptocurrencies would have little to no effect on the dollar in future since it would still carry a relatively small percentage in future due to its volatility and risk. Keywords: Cryptocurrency, digital currency, virtual currency, fiat dollar, bitcoins, halving DOI: 10.7176/RJFA/11-14-01 Publication date:July 31st 202

Single-tiered hybrid PoW consensus protocol to encourage decentralization in bitcoin

We propose a single-tiered hybrid Proof-of-Work consensus protocol to encourage decentralization in bitcoin. Our new mechanism comprises coupled puzzles of which properties differ from each other; the one is the extant outsourceable bitcoin puzzle while the other is non-outsourceable. Our new protocol enables miners to solve either puzzle as they want; therefore, blocks can be generated by either puzzle. Our hybrid consensus can be successfully implemented in bitcoin, because it is backward-compatible with existing bitcoin mining equipment(more precisely, existing bitcoin mining ASICs

The Use Of Bitcoins In Light Of The Financial Crisis: The Case Of Greece

In 2008, following the outbreak of the global financial crisis, a new trading system emerged that was made possible by cryptographically-produced currencies. Among them, the most popular digital cryptocurrency is undoubtedly the Bitcoin. This alternative way of trading quickly captured the interest of both businesses and consumers. Combined with a general lack of confidence towards financial institutions, central governments, and the effect of capital controls imposed across several countries, Bitcoins begun being used extensively for funds transfer across borders and general payments. However, it is unclear whether the use of Bitcoins is extensive enough so as to lead to complete or partial disintermediation of monetary transactions, and whether users understand how the technology works and what are the inherit risks of this alternative payment mechanism. This paper addresses these questions through a survey-based study, conducted within the Greek context, where capital controls are still active and awareness regarding cryptocurrencies seems to be on the rise. Our findings show that despite that end-users of Bitcoin are somewhat concerned with regards to security issues, they are nevertheless interested in its use for identifying new business opportunities and bypassing residencybased measures, such as capital controls

Top Ten Obstacles along Distributed Ledgers' Path to Adoption

This article presents the top ten obstacles towards the adoption of distributed ledgers, ranging from identifying the right ledger to use for the right use case to developing scalable consensus protocols that provide some meaningful notion of public verifiability

Diversification Across Mining Pools: Optimal Mining Strategies under PoW

Mining is a central operation of all proof-of-work (PoW) based cryptocurrencies. The vast majority of miners today participate in "mining pools" instead of "solo mining" in order to lower risk and achieve a more steady income. However, this rise of participation in mining pools negatively affects the decentralization levels of most cryptocurrencies. In this work, we look into mining pools from the point of view of a miner: We present an analytical model and implement a computational tool that allows miners to optimally distribute their computational power over multiple pools and PoW cryptocurrencies (i.e. build a mining portfolio), taking into account their risk aversion levels. Our tool allows miners to maximize their risk-adjusted earnings by diversifying across multiple mining pools which enhances PoW decentralization. Finally, we run an experiment in Bitcoin historical data and demonstrate that a miner diversifying over multiple pools, as instructed by our model/tool, receives a higher overall Sharpe ratio (i.e. average excess reward over its standard deviation/volatility).Comment: 13 pages, 16 figures. Presented at WEIS 201

Criptomoeda: o Bitcoin

A síntese da moeda Bitcoin, a história da criptomoeda e do Bitcoin, o movimento Cyberpunk, as primitivas das tecnologias das criptomoedas, criptografia assimétrica, encriptação de chave pública, assinaturas digitais, Blockchain, endereços digitais, administração de consenso, prova de trabalho (PoW), mineração e impossibilidade de gastos duplicados.The synthesis of the Bitcoin currency, the history of cryptocurrency and Bitcoin, the Cyberpunk movement, the primitives of cryptocurrency technologies, asymmetric cryptography, public key encryption, digital signatures, Blockchain, digital addresses, consensus management, proof of work (PoW ), mining and the impossibility of duplicate expenses.info:eu-repo/semantics/publishedVersio