Trustless
Technology changes constantly, with it comes improvements or at least we hope it does. Currently people are becoming more and more enamored with the idea of using a blockchain and cryptocurrency. Keep in mind that a cryptocurrency is a bi product of the network sustainability of a consensus. What this means is that the miners are proofing each of the blocks, as a reward they are given the block reward plus any transaction fees. This is how your typical Proof-of-Work/Proof-of-Capacity system would work. I should clarify many marketers are attempting to rebrand this model into something more controlled.
Some companies are now getting heavily involved in the cryptocurrency space. This is where the waters begin to get real murky with the goal of trustless networks and true decentralization. If a cryptocurrency has a CEO, then it has literally failed to meet any criteria related to being trustless. Pre-mining is also an indicator of not being trustless. Pre-mining is the act of either a percentage of mined block rewards are given to developers or the coin’s software was public much later allowing for the developers to mine blocks prior to the public or release audience. It is important to note that many claim bitcoin is a premine, it is not. Stop with misinformation. One last indicator is the idea of a mortgage/staking model. In a staking system you have “masternodes”, which handle all the transaction validation for that network. In most cases are also the only ones with copies of the ledger, and any and all “peers” would sync from said nodes during bootstrapping. Will shed some more light on this after we cover a few things.
A trustless consensus is one that is capable of running without the permission of anyone else in the network. What this means is that the user is permitted to download the node software, mining software, and begin submitting for blocks on their network. If this is not permitted on the network you are using or a cryptocurrency you are interested in, then it is not trustless. In the early days there was no mining pools, that would change as the difficulty began to grow for bitcoin. Mining pools allow for everyone to share the rewards as well as all submit together as one. This system is how many miners will forecast ROI(return on investment), this leads to centralizing the mining power to one central entity. That can get quite dangerous as that entity can continue to grow as the appeal to profit encourages others and new miners to join the “winning” team.
Consensus
Proof-of-Work(PoW), the consensus bitcoin uses. Proof-of-work allows for a CPU/GPU/ASIC to generate hashes to submit to a mining pool or to the local node. Proof-of-Work has a changing difficulty so that large miners also make the possibility of finding a block much harder for everyone, not just small miners. This scaling of difficulty has a side effect of more energy usage in order to mine blocks. Some examples of the hashing algorithms used in PoW are sha256 and sha3. PoW is trustless by allowing anyone to start submitting hashes.
Proof-of-Capacity(PoC) is the consensus that burstcoin uses. Proof-of-Capacity utilizes a shabal-256 hash output via CPU/GPU as it is currently ASIC proof and writes to the hard drive. This process is referred to as plotting, and you would plot a specific disk size. This plot is read and submissions are based on the plot. This is a short summary, to learn more click here. Just like Proof-of-Work it also has a scaling difficulty that changes based on network size. Similarly to the difficulty changing based on hashrate of the network, in this case the size of the network impacts the difficulty. PoC is also trustless in that anyone can start submitting.
Proof-of-Stake(PoS) is a consensus that is currently in use by a cryptocurrency called DASH. The way that staking works in this model is much different than the aforementioned consensus protocols. In this consensus model the user would “stake” or attributing the masternode of choice(or maybe not depending on chain). By attributing the masternode this allows them(the masternodes) to participate in the Proof-of-Work validations being performed only by the masternodes of that network for the blocks associated. However, the masternode is essentially only able to mine the percentage of blocks based on percentage of coins attributed to said miner. Masternodes in most networks require some amount of either fiat purchase of said node, an amount of the coin in which to stake for said miner to become masternode, and just about any other reason someone can think of including just being friends of the company and or development team. Note, not all PoS coins use masternodes and some allow for a more trustless approach such as peercoin. The networks are permissioned as you must stake coins to participate instead of being able to mine and join. PoS is permissioned and not trustless as you can not start without coins on the network to begin mining.
Delegated-Proof-of-Stake, or DPOS is a system derived from the Proof-of-Stake system and is in use by EOS. In this model the network “votes” or elects block producers for the network. In many cases the block producers are companies that have a large amount of a currency or are associated with some of the teams that started the cryptocurrency. DPOS model is similar to how a banking system works in a lot of ways. One being that you are trusting someone else to validate the transactions just as in the banking system, except this time it can be sort of gamed or manipulated to keep certain block producers mining. DPOS is permissioned and a trust based system.
Security
Security is not inherent to a blockchain. Anyone spouting this nonsense is not only wrong but is severely misinformed if they truly believe that. A blockchains security is derived from the validation by others. Anytime you remove the ability to validate from network participants you have effectively not only disabled security but in fact created a centralized security risk. Limiting the number of validators is bad for security and bad for the user’s as it compromises the security.
Some will have you believe that they have a large number of validators and that could work for their business, but for a cryptocurrency that is to be used as currency should be able to be validated by all members of the network. The power of a blockchain is not based on tps and or fast block times. This actually leads to other issues concerning the users. In some networks, I will refrain from disclosing only have ten or less masternodes. This is a huge attack vector and you would not even need a 51% attack to change the ledger as most use a bootstrapping model that clients only sync from the masternodes.
A very important piece of information is to consider is when a business running a cryptocurrency may be shut down or what happens when they are raided by a government for any reason. This can be dangerous, but consider if a network only has a few masternodes and they are all taken down, the network will no longer function and the chain would not be available. This is a scenario often over looked because of the idea of profiting off of the performance of said launch of coin. Let’s consider the long term effect that could have if a region had adopted using the chain due to flooding of people in the area to support the usage. Now, these individuals are left not only without a network but also without the currency on that network. This would be a huge economical burden in such case.
Compromises
In any system in which you are not permitted to validate transactions on the network, you are essentially allowing control of your funds. This is not a new model and is literally just trusting random people on that network to control your funds much like you trusting the banks in the banking system. Trusting individuals to validate on your behalf can and will lead to problems, any and all issues currently seen in the banking system would then be possible within such a system. In some cases you may often see things referenced such as voting or electing block producers or masternodes in some systems, do not be fooled. It is still a trust system and as we are to progress we must not continue to adopt the old way into new technology.
There is now a growing trend of more and more coins launched by businesses. In turn, they are requiring of more information than what is required to open a bank account to even use the said currency. If we are to bank the bankless, or to allow for everyone to participate in this revolution, then we must ask ourselves at what point did we go full circle and are literally just attempting to rebrand the old way.
In a lot of cases the word currency is being used to mislead these individuals into investing in ideas claiming “better than bitcoin”, “the new bitcoin”, and in regions where the technical aspects of the cryptocurrency world may not be well understood it leads to massive fueled investing. However, they are blindly going in as education of what the technology actually is versus smoke and mirrors the marketers push is lagging far behind. We need to educate on the actual technology and what the words mean versus hyping and making assumptions that it is understood. In order to grow, more must come into the environment understanding what the technology is versus trade hyping.
Closing
In closing, I want to make it very clear that the very goal of the cryptocurrency movement is just one aspect of the cypherpunk culture. Today people are forgetting this innately critical aspect to the cryptocurrency and it’s technology. This system is not to progress just to allow for companies to take over with consensus and controlling of networks. In allowing for such things we have not only failed in the revolution but we allowed greed to open the doorways for businesses to control our finances yet again. Trustless networks allows for the people to retain their power against a government issued monetary policy. Anyone who tells you that this all for pure store of value has lost sight of the idea of peer-to-peer/entity. Using the word entity with peer as this could describe a business that accepts cryptocurrency for a service or goods they may provide.
As we are starting to see the United States Congress step in on businesses such as Facebook and soon to be others for cryptocurrency. It is imperative that we use chains with trustless consensus and a permissionless network. If we do not, then we are going full circle back into the old system with a new label. Do not lose sight of the end goal.
Examples of coins with trustless consensus, a permissionless network, no corporate entity running the show are as follows:
Bitcoin, Burstcoin, Dogecoin, Ethereum Classic, and Monero.
The following article can be found it in it’s original text format on the Burstcoin blockchain using CloudBurst to download the following transaction CLOUD-4YZ5-SKBU-JGCM-7VJXX.
