Proof-of-Stake Sidechains

Sidechains have long been heralded as the key enabler of blockchain scalability and interoperability. However, no modeling of the concept or a provably secure construction has so far been attempted. We provide the first formal definition of what a sidechain system is and how assets can be moved between sidechains securely. We put forth a security definition that augments the known transaction ledger properties of persistence and liveness to hold across multiple ledgers and enhance them with a new ``firewall\u27\u27 security property which safeguards each blockchain from its sidechains, limiting the impact of an otherwise catastrophic sidechain failure. We then provide a sidechain construction that is suitable for proof-of-stake (PoS) sidechain systems. As an exemplary concrete instantiation we present our construction for an epoch-based PoS system consistent with Ouroboros (Crypto~2017), the PoS blockchain protocol used in Cardano which is one of the largest pure PoS systems by market capitalisation, and we also comment how the construction can be adapted for other protocols such as Ouroboros Praos (Eurocrypt~2018), Ouroboros Genesis (CCS~2018), Snow White and Algorand. An important feature of our construction is {\em merged-staking} that prevents ``goldfinger\u27\u27 attacks against a sidechain that is only carrying a small amount of stake. An important technique for pegging chains that we use in our construction is cross-chain certification which is facilitated by a novel cryptographic primitive we introduce called ad-hoc threshold multisignatures (ATMS) which may be of independent interest. We show how ATMS can be securely instantiated by regular and aggregate digital signatures as well as succinct arguments of knowledge such as STARKs and bulletproofs with varying degrees of storage efficiency

Blockchain Security: Situational Crime Prevention Theory and Distributed Cyber Systems

The authors laid the groundwork for analyzing the crypto-economic incentives of interconnected blockchain networks and utilize situational crime prevention theory to explain how more secure systems can be developed. Blockchain networks utilize smaller blockchains (often called sidechains) to increase throughput in larger networks. Identified are several disadvantages to using sidechains that create critical exposures to the assets locked on them. Without security being provided by the mainchain in the form of validated exits, sidechains or statechannels which have a bridge or mainchain asset representations are at significant risk of attack. The inability to have a sufficiently high cost to attack the sidechain while mainchain assets can be withdrawn, along with the disconnect between the integrity of the sidechain and the value of the stolen assets are among the top disadvantages. The current study used a vulnerability analysis and theoretical mathematics based on situational crime prevention theory to highlight the attack vectors and prevention methods for these systems. Much of the analysis can be applied to any distributed system (e.g. blockchain network), particularly any supposedly trustless off-chain component. The equations developed in the current study will hold for any two chains that are bridged and pass value back and forth and provides evidence to suggest a public sidechain is likely not a viable option for scalability due to security concerns. Criminal strategies on blockchain networks in the digital realm are similar to criminal strategies in the physical realm; therefore, the application of criminology can lead to more efficient development and ultimately more effective security protocols

PUBLIC BLOCKCHAIN SCALABILITY: ADVANCEMENTS, CHALLENGES AND THE FUTURE

In the last decade, blockchain has emerged as one of the most influential innovations in software architecture and technology. Ideally, blockchains are designed to be architecturally and politically decentralized, similar to the Internet. But recently, public and permissionless blockchains such as Bitcoin and Ethereum have faced stumbling blocks in the form of scalability. Both Bitcoin and Ethereum process fewer than 20 transactions per second, which is significantly lower than their centralized counterpart such as VISA that can process approximately 1,700 transactions per second. In realizing this hindrance in the wide range adoption of blockchains for building advanced and large scalable systems, the blockchain community has proposed first- and second-layer scaling solutions including Segregated Witness (Segwit), Sharding, and two-way pegged sidechains. Although these proposals are innovative, they still suffer from the blockchain trilemma of scalability, security, and decentralization. Moreover, at this time, little is known or discussed regarding factors related to design choices, feasibility, limitations and other issues in adopting the various first- and second-layer scaling solutions in public and permissionless blockchains. Hence, this thesis provides the first comprehensive review of the state-of-the-art first- and second-layer scaling solutions for public and permissionless blockchains, identifying current advancements and analyzing their impact from various viewpoints, highlighting their limitations and discussing possible remedies for the overall improvement of the blockchain domain