ABSTRACT
A crypto-currency system based and derived from Bitcoin is described in this paper. Proof of Stake (PoS), a fairer and more efficient proofing method, is introduced to replace Proof of Work (PoW) in Bitcoin to ensure the security of the decentralized network and offer faster transaction. In addition, a new rewarding mechanism is introduced to encourage more nodes to join the network, to further avoid the 51% attack.
INTRODUCTION
Traditional electronic currency systems rely on a centralized service to ensure the transaction security. Decentralization of crypto-currency, as a concept, has been discussed for decades. It remains a major challenge how to build a Byzantine Fault Tolerance (BFT) multiparty consensus system.
Before the introduction of Bitcoin, a lot of research focused on 25% attacking tolerance, which did not tackle the problem in its totality. The innovation of Bitcoin1) in 2008 by Satoshi Nakamoto raised the tolerance to 50%. Two major principles are also designed to make the attacks more difficult: i) the system encourages contributors (a.k.a. miners) to join the network by providing mining rewards; ii) a block is generated and signed every ten minutes in the chain, making it harder to fake the previous blocks.
Bitcoin was a great attempt in avoiding attacks in the crypto-currency systems. As a result, it remains the highest market values. A lot of active research is been carried out to further improve Bitcoin. One major focus is around PoW. As proposed by Satoshi, PoW works as one-CPU-one-vote and double SHA-256 is used. It soon comes to people’s realization that this algorithm depends significantly on the energy and hardware investment. Although the energy consumption by Bitcoin may seem insignificant compared to traditional electronic currencies, the unfairness introduced by the different level of hardware investments intensified. Bitcoin mining hardware has involved from CPU to GPU and now ASIC devices. The performance of different hardware causes significant bias2), and deviates from the one-CPU-one-vote principle. To handle this problem, the famous LiteCoin3) and Darkcoin4) modified the algorithm in PoW to reduce the energy consumption and the unfairness, by increasing the dependency on CPU. The problem was largely tackled by the introduction of PoS (Proof of Stake) in 20115). Computing is no longer depended on, making it by far the most efficient solution. Peercoin6) and NXT7) utilized the same mechanism, verifying its reliability.
Though the new PoS approach is recognized as the start-of-the-art, it has a major drawback that each node must hold some currency to take part in mining. The more one holds, the more rewarding it would be. Those without any holding would get no return in the network. These pose a major entry barrier, and discourage new and honest nodes to participate, making the network venerable.
In this paper, we introduce a novel and superior reward mechanism, and the new crypto-currency vpal based on it.
TRANSACTION AND RELIABILITY
Transaction is the major function of any currencies representing money in circulation. Like all other crypto-currencies, vpal also uses transactions to record the spent of a certain amount of money, including the sources and destinations. Sources are the historical transactions from where the money was accumulated. They act as the proof that the sender processes the money and it has not been paid to any one else. Destinations are where the money will be sent, and the recipient will use them as a proof that he owns the money, when he makes another transaction.
The implementation is straightforward but highly secure. User applies a public key as his account address and uses other's public key as transaction destination. As shown in the figure below, a transaction destination that has not been used as the source of any other transaction is called an Unspent Transaction Output (UTXO). When the owner of a UTXO launches a transaction, he signs it as the source of the transaction by his private key, so it can be easily verified by others later using the public key.
To avoid multiple transactions made with the same source (a.k.a. double spend risk), we need to make a stable storage accepted by most nodes, ensuring each source of a transaction is unique, and the storage will not be compromised. Once a transaction is accepted by the storage, it is confirmed that it is spent only once. The storage and its security are provided by the Block Chain and the Proof of Stake.
BLOCK-CHAIN
The implementation of block chain is divided into the following steps. First, a set of transactions is consolidated. The source of each transaction in the same set must be globally unique. We merge the signature of this set and the signature of the previous block to generate the current block. Each block keeps the signature of previous block, making it a chain called block chain, as shown in the figure below.
The advantage of using block chain is that it ensures a transaction cannot be modified without changing the block that records it and all the following blocks. Each block stores the signature of previous block and any modification in the previous blocks will cause the change of signature. Signature of a block is also calculated by the transaction information in the block, and any modification on the transaction will also cause the change of signature.
PROOF-OF-STAKE
Crypto currencies use “prove mechanism” to randomize blocks produced by each active node to avoid any compromise to historical transactions. Proof of Stake (PoS) is a proposed alternative to Proof of Work (PoW). Like PoW, PoS provides a mechanism to determine who signs transactions. PoS has been deemed as an effective proof mechanism.
The prerequisite of the stake proof is that each node involved in mining need to prove that they have a certain amount of currency, called “Stake”. This is implemented by adding a particular transaction record in the particular block.
Three values are essential to determine which account is eligible to generate a block and be authoritative in times of conflict: the time since the last block, the effective balance and the public key of the account. We use some hash algorithm and simple calculation to gain the values for each account. The node with the lowest target value obtains the right to produce the next block and sign the transaction in the time window.
Moreover, once a particular transaction is used to construct a block and is accepted by the network, the node cannot reuse the same transaction to construct another new block. The only feasible way is to perform a new transaction, while the time length will be recalculated. With this, the probability of each node generating a block is entirely randomized. It can effectively avoid a strong node generating large amount of blocks, compromising the history transactions.
FAST TRANSACTIONS
Since PoS does not require significant computation power, it is very quick to create a block in the block chain based on a PoS system. Transactions can be carried out and confirmed very rapidly.
Multi-signature can further improve the speed of transactions by involving a third party which is trusted by both sides of the transaction. This is widely used by several online wallet applications, e.g. GreenAddress 8). Another advantage is that it offers better safety - the coins within the transaction cannot be stolen even if the private key of any side is leaked.
ISSUANCE AND DISTRIBUTION
Unlike Bitcoin that is based on mining, the new currency is issued every day at a fixed rate, and reduced to half after a fixed number of days. In a few years, the total amount of the currency reaches its maximum.
Except the coins from genesis, the new coins will be issued and distributed to the active nodes in three ways:
Forging rewards (generated coins). Every block obtains some reward of coins generated. Since the generator account of the block is randomly selected by the network, any node has a chance of forging. The reward will degenerate to zero with time. This mechanism helps to get a lot of nodes joining network at the very beginning, and controls the total amount of coins at the end.
Transaction fees (distributed coins, not generated). Every transaction requires some minimum fee. The generator of a block will get the total fees of all transactions in the block. The creator can select another fee for a transaction. Forging accounts will likely select transactions with the highest fee. Transaction fees will make up for the decrease of the forging rewards, as the amount of transactions increases with time.
Account rewards (generated coins). This is an improvement to PoS. As previously mentioned, the newly created accounts have a slim chance for forging because of the tiny stake in PoS system. We improve this from 2 aspects：
Encourage existing active accounts to invite new accounts. Any account who wants to join the network must obtain an invitation which contains some tiny amount of coins from an active account. It is in consideration to add a relation chain, where the issuance of the new coins will involve the calculated weight through the account’s relation chain.
Consider the holding time of the stake, like PPCoin’s “Coin Age”6). We distribute coins to the active accounts in the network according to the account’s balance rank.
PROOF OF STAKE ATTACKS
create new accounts
Since we use SHA256 hashing algorithm, it is almost impossible for attackers to generate same hash from different passwords. The generated 256-bit public key has 2256 address space, so it is almost impossible to try to generate same hash value from two separate values.
