Bitcoin P2P e-cash paper
bear at sonic.net
Fri Nov 14 18:20:23 PST 2008
Okay.... I'm going to summarize this protocol as I understand it.
I'm filling in some operational details that aren't in the paper
by supplementing what you wrote with what my own "design sense"
tells me are critical missing bits or "obvious" methodologies for
First, people spend computer power creating a pool of coins to use
as money. Each coin is a proof-of-work meeting whatever criteria
were in effect for money at the time it was created. The time of
creation (and therefore the criteria) is checkable later because
people can see the emergence of this particular coin in the
transaction chain and track it through all its "consensus view"
spends. (more later on coin creation tied to adding a link).
When a coin is spent, the buyer and seller digitally sign a (blinded)
transaction record, and broadcast it to a bunch of nodes whose purpose
is keeping track of consensus regarding coin ownership. If someone
double spends, then the transaction record can be unblinded revealing
the identity of the cheater. This is done via a fairly standard cut-
and-choose algorithm where the buyer responds to several challenges
with secret shares, and the seller then asks him to "unblind" and
checks all but one, verifying that they do contain secret shares any
two of which are sufficient to identify the buyer. In this case the
seller accepts the unblinded spend record as "probably" containing
a valid secret share.
The nodes keeping track of consensus regarding coin ownership are in
a loop where they are all trying to "add a link" to the longest chain
they've so far recieved. They have a pool of reported transactions
which they've not yet seen in a "consensus" signed chain. I'm going
to call this pool "A". They attempt to add a link to the chain by
moving everything from pool A into a pool "L" and using a CPU-
intensive digital signature algorithm to sign the chain including
the new block L. This results in a chain extended by a block
containing all the transaction records they had in pool L, plus
the node's digital signature. While they do this, new
transaction records continue to arrive and go into pool A again
for the next cycle of work.
They may also recieve chains as long as the one they're trying to
extend while they work, in which the last few "links" are links
that are *not* in common with the chain on which they're working.
These they ignore. (? Do they ignore them? Under what
circumstances would these become necessary to ever look at again,
bearing in mind that any longer chain based on them will include
But if they recieve a _longer_ chain while working, they
immediately check all the transactions in the new links to make
sure it contains no double spends and that the "work factors" of
all new links are appropriate. If it contains a double spend,
then they create a "transaction" which is a proof of double
spending, add it to their pool A, broadcast it, and continue work.
If one of the "new" links has an inappropriate work factor (ie,
someone didn't put enough CPU into it for it to be "licit"
according to the rules) a new "transaction" which is a proof
of the protocol violation by the link-creating node is created,
broadcast, and added to pool A, and the chain is rejected. In
the case of no double spends and appropriate work factors for
all links not yet seen, they accept the new chain as consensus.
If the new chain is accepted, then they give up on adding their
current link, dump all the transactions from pool L back into pool
A (along with transactions they've recieved or created since
starting work), eliminate from pool A those transaction records
which are already part of a link in the new chain, and start work
again trying to extend the new chain.
If they complete work on a chain extended with their new link, they
broadcast it and immediately start work on another new link with
all the transactions that have accumulated in pool A since they
Do I understand it correctly?
Biggest Technical Problem:
Is there a mechanism to make sure that the "chain" does not consist
solely of links added by just the 3 or 4 fastest nodes? 'Cause a
broadcast transaction record could easily miss those 3 or 4 nodes
and if it does, and those nodes continue to dominate the chain, the
transaction might never get added.
To remedy this, you need to either ensure provable propagation of
transactions, or vary the work factor for a node depending on how
many links have been added since that node's most recent link.
Unfortunately, both measures can be defeated by sock puppets.
This is probably the worst problem with your protocol as it
stands right now; you need some central point to control the
identities (keys) of the nodes and prevent people from making
new sock puppets.
Provable propagation would mean that When Bob accepts a new chain
from Alice, he needs to make sure that Alice has (or gets) all
transactions in his "A" and "L" pools. He sends them, and
Alice sends back a signed hash to prove she got them. Once
Alice has recieved this block of transactions, if any subsequent
chains including a link added by Alice do not include those
transactions at or before that link, then Bob should be able to
publish the block he sent Alice, along with her signature, in a
transaction as proof that Alice violated protocol. Sock puppets
defeat this because Alice just signs subsequent chains using a
new key, pretending to be a different node.
If we go with varying the work factor depending on how many new
links there are, then we're right back to domination by the 3
or 4 fastest nodes, except now they're joined by 600 or so
sock puppets which they use to avoid the work factor penalty.
If we solve the sock-puppet issue, or accept that there's a central
point controlling the generation of new keys, then generation of
coins should be tied to the act of successfully adding a block to
the "consensus" chain. This is simple to do; creation of a coin
is a transaction, it gets added along with all the other transactions
in the block. But you can only create one coin per link, and of
course if your version of the chain isn't the one that gets accepted,
then in the "accepted" view you don't have the coin and can't spend
it. This gives the people maintaining the consensus database a
reason to spend CPU cycles, especially since the variance in work
factor by number of links added since their own last link (outlined
above) guarantees that everyone, not just the 3 or 4 fastest nodes,
occasionally gets the opportunity to create a coin.
Also, the work requirement for adding a link to the chain should
vary (again exponentially) with the number of links added to that
chain in the previous week, causing the rate of coin generation
(and therefore inflation) to be strictly controlled.
You need coin aggregation for this to scale. There needs to be
a "provable" transaction where someone retires ten single coins
and creates a new coin with denomination ten, etc. This is not
too hard, using the same infrastructure you've already got; it
simply becomes part of the chain, and when the chain is accepted
consensus, then everybody can see that it happened.
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