One of the most serious issues in current bitcoin is the speed: how quickly transactions are approved and can be spent. In a recent video interview for the Financial Times, Dr. Courtois of UCL has said:
“It’s not true that bitcoin is The Internet of Money.
Bitcoin is The Horse Carriage of Money”.
There are many solutions which allow a P2P payment network such as Bitcoin to create consensus MUCH FASTER than waiting for the next block to be mined.
- Here is our poster presented at SECRYPT 2014 in Vienna on 28 August 2014.
- An earlier discussion with a number of possible solutions can be found in Section 7 of this paper.
- Our key proposal is that transactions should offer small additional outputs which are sent to a number of “reactive” peers on the network which are expected to spend them immediately within seconds.
- Such Peer Re-Confirmations can then be chained which makes them much harder to forge.
- Our solutions have also an incredible advantage to fix another major problem in bitcoin: its declining network which has reached dangerously low levels because there is no monetary incentive whatsoever to run bitcoin nodes. Our solutions create monetary incentives for nodes to be around by offering them outputs to spend.
Other Solutions, Peer Spending vs. Peer Voting vs. Proof of Stake
Other known solutions:
- On September 2014, Ripple network has proposed their RPCA solution to achieve fast consensus in a peer network without expensive (and slow) proof of work. they claim that consensus is reached very quickly and transactions can be approved “in a matter of seconds”. This RCPA solution is very different than our solutions and it does not address the problem of peer incentives and declining network. It also claimed centralized here.
- Stellar also seems to have very fast transactions, at this moment we ignore how exactly their solution works.
- Some alt-coins have proof of stake (POS) mechanisms. There is a huge space for designing a variety of mechanisms of this type. Well-known pioneers are Peercoin and Nxt. Very little is known about how robust these solutions are.
- One crucial problem is that only a small percentage of network nodes are active and participate in POS. If you don’t actively participate, you lose money. Thus in Nxt many users decided to trust third parties with their money in order not to lose their rights to obtain freshly created coins. This is pretty dangerous and leads to centralization.
- Daniel Larimer at bitshares.org have designed a Delegated POS system which tries to make this delegation of power more apparent and more reasonable.
The power is delegated to a super network of 2^16 delegates, out of which the top 100 are active and are allowed to generate new blocks. Delegates carry the rights to mine on behalf of a larger group of network participants. The 100 delegates have equal powers. People can choose which delegates they trust and can also vote against some delegates.
This is actually similar to current bitcoin mining with pools, however in bitcoin there is only like 10 delegates (10 largest pools control most of the hash power) and you delegate the hash capacity, not a mining capacity resulting from your stake.