Part 3: Searching for the cure to blockchain's maladies


To be straightforward, many blockchains still resemble a Wild West scenario. In the crypto realm, instead of a Wild West, it often resembles a casino where twenty-five thousand "degens" globally vie to win each other's money. Nonetheless, our approach is to allow crypto to pursue its course while concentrating on the technological aspects that underpin it—the technology that empowers the crypto ecosystem.

What have we seen in the blockchain industry so far?

In 2022, we observed a project's rise and fall, initially recognized as a "scalable" solution. However, the year was marred by frequent outages and overloads, leading to vulnerability to a centralized exchange.
We have seen a 2015 hyper-inclusive idea being turned into a hyper-exclusive blockchain for the wealthy in 2020. Ethereum - A great achievement of blockchain innovation, which became too expensive for normal people to operate daily due to the congestion of network transactions. A chain in which you need to bribe miners to prioritize your transactions, which still can be front-run by bots.
Then, the DeFi and NFT boom of 2021 caused skyrocketing costs for interacting with smart contracts.
People with resources could still make money, but smaller participants left most of their trading profits in fees. Nevertheless, the truth is that nobody was forcing them to interact with the network at these times.

However, there is no one specific to blame; it is only the price for success.

Certain projects aimed for speed but faced functionality issues. Others sought to sustain high traffic peaks while prioritizing speed, only to discover they became cost-prohibitive. Some attempted to address these challenges but essentially transformed into centralized solutions, contradicting the fundamental principles of what blockchain should embody.

Certainly, certain Proof of Work (PoW) blockchains, like Bitcoin, achieve decentralization and robust security through miners' contributions (greediness). Conversely, blockchains prioritizing simplicity, as seen in the differences between Bitcoin and Ethereum (such as the longest chain rule and the inability to run smart contracts), recognize that speed isn't a deliberate design and decision choice. In the end, the throughputs of PoWs, in general, remain decoupled from hash rates.

If any chain boasts about "many transactions per second (TPS) and the ability to scale," the question to be asked on their account is:

"What are you guys sacrificing to make this fast and not bottlenecked?"

The architects behind blockchain projects must decide on an inevitable trade-off:
Do they want to accelerate the first transaction confirmation, or do they want to raise the hardware requirements (which would be the way to centralization since the smaller miners create conflicting blocks)?

There is an eminent urgency for a decentralized PoW network with low hardware requirements, fast synchronization running nodes, and affordability in the long run.

A network where high TPS implies that the same security can be bought with a lower fee per transaction and where fees fund security.

A network that is capable of providing a new way of implementing smart contracts.
A network where the users are not victims of the gas bidding wars, where front-running sandwich attacks do not target decentralized exchanges, and where the MEV predators do not profit by reordering, excluding, or inserting transactions in the blocks.

This solution would also need to address requirements for the main cryptocurrency use: money and finance.

When treated as money, cryptocurrencies need to be fast and backed by a resilient base layer. Finance needs the expressiveness of the smart contract with a focus on how the agreed state is in relation to other conditions: this and many other aspects of a well-designed application layer.

A decentralized network that wants to contain all of this and address all the needs of today's "world of crypto" needs to be surveyed and reinvented from a fresh new perspective.

Somebody needs to reuse the most significant contribution to the blockchain technology we already have, pay close attention to what was phenomenal and revolutionary, observe and reiterate the mistakes and misfortunes of the industry first-runners, test heavily before prophesying results and mass adoption, and lastly, reinvent the aspect that stops these cryptographical achievements to scale while remaining decentralized and secure.

One might argue that the inherent problem with blockchain lies in its DNA, emphasizing the necessity to focus on the linearity of storing blocks in the chain and eliminating forks. This approach results in the phenomenon of a high orphan rate.
Before we delve into the topic, let's familiarize ourselves with the two terms for unaccepted blocks, essentially orphaned: Orphan for Bitcoin and Uncle for Ethereum.

An uncle block is a block that didn't make it onto the accepted chain. Only one block can be mined and acknowledged as accepted on the blockchain. The remaining blocks are uncle blocks. Uncle blocks come into existence when two or more miners produce blocks at nearly the same time. While uncle blocks share similarities with orphan blocks on Bitcoin, they exhibit subtle distinctions connected with the Ethereum protocol. Uncle blocks are valid blocks that the network has rejected after the new-block propagation period ends. Miners receive compensation for producing an uncle block, in contrast to an orphan block in Bitcoin, where miners aren't rewarded. Now, we can continue with our PoW model.

In Bitcoin, Orphan nodes refer to blocks mined simultaneously but not accepted into the blockchain, which adheres to the longest chain rule as its consensus. As the network speed increases, more orphans are generated. A high orphan rate is acknowledged to compromise security. When honest blocks find themselves outside the longest chain due to spontaneous forks, the overall security of the chain is diminished.

While this issue might not manifest in slow networks, achieving true adoption requires the decentralized network to be fast, secure, and decentralized simultaneously, doesn't it?

Addressing a radical change in decentralized network consensuses is imperative to establish a network that is both fast and secure, essentially eliminating the issue of orphans from the outset.

The trilemma of scalability, decentralization, and security in synchronous blockchain protocols says that you can have at most two out of the three of these qualities at the same time but never all three. Coming to the rescue, blockDAG paradigm protocols and their capability to order blocks in graphs where a new block refers to all parallel blocks (forks) instead of a simple tip can resolve the trade-off between speed and security for blockchains that need to scale effectively.

However, is it even possible to reforge the blockchain, without the chain?

The solution to this challenge may be found by approaching the technology with a fresh perspective and leveraging protocols like Kaspa's GHOSTDAG (blockDAG PoW protocol), developed by Dr. Yonatan Sompolinsky, Prof. Aviv Zohar, and Shai Wyborski.

The cure to that speed-security trade-off lies in the following challenge:
"Is it feasible for your network to achieve rapid consensus and confirmation times while concurrently preventing a 49% attacker from undermining and disrupting the ordering or the consensus itself?"

Using the blockDAG PoW with strong ordering protocols opens unprecedented opportunities for the issues of today's blockchain. The pioneer of this approach is Kaspa, a project co-founded by Yonatan Sompolinky. Still, we must emphasize that Kaspa is a community effort that follows the same development model as Bitcoin and aims to be a digital silver to Bitcoin's gold.

A blockDAG network, similar to some blockchains, holds great promise as a solution to numerous challenges individuals face today, including corruption and persecution by authorities. Its decentralization and ideologically striking similarity with blockchains have the potential to eradicate systemic single points of failure, with security derived from the hashing power of miners and a well-crafted consensus mechanism, fostering trustlessness. Robust cryptography and ordering protocols would offer resistance against double-spending and history reorganization frauds. Simultaneously, its speed would be derived from a rapid block creation rate without being hampered by network latency resulting from the creation of numerous forks by miners - and this very last part is when blockchains do fail.

Before exploring a secure and decentralized solution that is also fast, we must address the issue mentioned—the imperative to mitigate the high orphan rate problem within decentralized PoW networks that want to benefit from the security of the Nakamoto consensus but yet want to overcome its limitations. The problem with orphaned blocks compromises network security and squanders the energy invested in mining numerous forks within chains governed by the longest chain rule. To tackle this, we leverage inclusive protocols like GHOSTDAG, which encompasses all blocks created by parallel branches, referencing them comprehensively so that DAG edges connect the new block to all reachable tips created by all those available parallel blocks.

This way, every fork and its blocks become integral to the network's history.

Then, We need to maintain a property where the 50% security threshold is preserved for any network speed and block creation rate while going as arbitrarily low as 100 milliseconds for transaction confirmation time.

Once more, the remedy for this issue lies in the overarching generalization of the Nakamoto consensus and its longest chain rule, as initially introduced in Bitcoin.
The generalization that suits setups with fast block creation rate or large blocks.

In contrast to off-chain solutions like the Lightning Network, where transactions occur on a separate layer, blockDAG PoW protocols like GHOSTDAG advocate for an "on-chain/on-DAG" approach to achieve scalability. It employs a greedy version algorithm, as introduced in the PHANTOM paper on the blockDAG, to identify blocks mined by "honest" nodes.
At the same time, it doesn't include blocks from "non-cooperating" nodes that deviate from the mining protocol.

The final element in constructing the ideal decentralized PoW network, enhancing confirmation times and addressing current blockchain challenges, is to minimize assumptions about the network. This entails removing the requirement to assume a bound on network latency. The achievement of this objective is facilitated by the blockDAG protocol's parameterless approach, employing the DAGKnight protocol (Michael Sutton, Yonatan Sompolinsky) for those acquainted with the technology. :)

The following pages will explain why the generalization was needed and why the direct use of the longest chain rule without forks is not good for the decentralized and secure networks that need to scale and have a high block creation rate and low block propagation delay.

So let's change the linear ordering of a blockchain - which needs a sequential operation mode that does not support parallelism and where you cannot introduce new transactions until you agree on the previous state of what the chain is - for a directed acyclic graph (DAG), a directed graph with no directed cycles. Thus, we create a blockDAG and switch the longest chain rule (a chain with the highest block height) for a consensus from the research line of Yonatan Sompolinsky.

Let's explore the potential outcome; it might unfold like this:

"For the first time EVER, a pure proof-of-work protocol has been carrying THOUSANDS of transactions per second across dozens (maybe hundreds) of network nodes in a permissionless network, running on affordable hardware!"
"This is history in the making, and we are just getting started."
- Shai Deshe Wyborski