Blockchain: Blueprint for a New Economy

are higher. 183 On one hand, it is the

very wastefulness of mining that

makes it trustable—that rational

agents compete in an otherwise

useless proof-of-work effort in

hopes of the possibility of reward—

but on the other hand, these spent

resources have no benefit other than

mining.

Usability

The API for working with Bitcoind

(the full node of all code) is far less

user-friendly than the current

standards of other easy-to-use

modern APIs, such as widely used

REST APIs.

Versioning, hard forks, multiple chains

Some other technical issues have to

do with the infrastructure. One issue

is the proliferation of blockchains,

and that with so many different

blockchains in existence, it could be

easy to deploy the resources to

launch a 51-percent attack on

smaller chains. Another issue is that

when chains are split for

administrative or versioning

purposes, there is no easy way to

merge or cross-transact on forked

chains.

Another significant technical challenge

and requirement is that a full ecosystem

of plug-and-play solutions be developed

to provide the entire value chain of

service delivery. For example, linked to

the blockchain there needs to be secure

decentralized storage (MaidSafe, Storj),

messaging, transport, communications

protocols, namespace and address

management, network administration,

and archival. Ideally, the blockchain

industry would develop similarly to the

cloud-computing model, for which

standard infrastructure components—

like cloud servers and transport systems

—were defined and implemented very

quickly at the beginning to allow the

industry to focus on the higher level of

developing value-added services instead

of the core infrastructure. This is

particularly important in the blockchain

economy due to the sensitive and

complicated cryptographic engineering

aspects of decentralized networks. The

industry is sorting out exactly how much

computer network security,

cryptography, and mathematics expertise

the average blockchain startup should

have—ideally not much if they can rely

on a secure infrastructure stack on which

this functionality already exists. That

way, the blockchain industry’s

development can be hastened, without

every new business having to reinvent

the wheel and worry about the fact that

its first customer-facing ewallet was not

multisig (or whatever the current

industry standard is, as cryptographic

security standards will likely continue to

iterate).

Some of the partial proposed solutions

to the technical issues discussed here are

as follows:

Offline wallets to store the majority of

coins

Different manner of offline wallets

could be used to store the bulk of

consumer cryptocoins—for example,

paper wallets, cold storage, and bit

cards.

Dark pools

There could be a more granular

value chain such that big crypto-

exchanges operate their own internal

databases of transactions, and then

periodically synchronize a summary

of the transactions with the

blockchain—an idea borrowed from

the banking industry.

Alternative hashing algorithms

Litecoin and other cryptocurrencies

use scrypt, which is at least slightly

faster than Bitcoin, and other hashing

algorithms could be innovated.

Alternatives to proof of work for

Byzantine consensus

There are many other consensus

models proposed—such as proof of

stake, hybrids, and variants—that

have lower latency, require less

computational power, waste fewer

resources, and improve security for

smaller chains. Consensus without

mining is another area being

explored, such as in Tendermint’s

modified version of DLS (the

solution to the Byzantine Generals’

Problem by Dwork, Lynch, and

Stockmeyer), with bonded coins

belonging to byzantine

participants. 184 Another idea for

consensus without mining or proof of

work is through a consensus

algorithm such as Hyperledger’s,

which is based on the Practical

Byzantine Fault Tolerance algorithm.

Only focus on the most recent or unspent

outputs

Many blockchain operations could

be based on surface calculations of

the most recent or unspent outputs,

similar to how credit card

transactions operate. “Thin wallets”

operate this way, as opposed to

querying a full Bitcoind node, and

this is how Bitcoin ewallets work on

cellular telephones. A related

proposal is Cryptonite, which has a

“mini-blockchain” abbreviated data

scheme.

Blockchain interoperability

To coordinate transactions between

blockchains, there are several side

chains projects proposed, such as

those by Blockstream.

Posting bond deposits

The security of proposed alternative

consensus mechanisms like

Tendermints’s DLS protocol (which

requires no proof-of-work mining)

could be reinforced with structural

elements such as requiring miners to

post bond deposits to blockchains.

This could help resolve the security

issue of the “nothing at stake in short

time ranges” problem, where

malicious players (before having a

stake) could potentially fork the

blockchain and steal cryptocurrency

in a double-spend attack. 185 Bond

deposits could be posted to

blockchains like Tendermint does,

making it costly to fork and possibly

improving operability and security.

REST APIs

Essentially secure calls in real time,