Subject: Re: [bitcoin-dev] BIP Idea : DDoS resistance via decentrilized proof-of-work

From: Ilya Eriklintsev <[email-masked]>
Date: Thu, 22 Jun 2017 16:41:55 +0300

Thank you, Conrad, for the feedback and I think I can see your points
clearly, but I would disagree that decentralised proof-of-work doesn't
change game rules drastically.
You are correct about proof-of-work market splitting into
"transaction-miners" and "blockchain-miners", but this is not just another
way to pay the fees, it's actually completely different mechanism. Here are
some arguments that might be able to convince you or at least to question
your premises:

1. Since bitcoin mining is a game in which winner takes it all, modified
proof-of-work will introduce a new tradeoff for the miners: either you
collect more fees (increasing risk of losing reward) or you collect more
proof-of-work (increasing reward win probability). This will create the
missing economic link between transaction fees (BTC) and proof-of-work
security costs (Hashcash PoW), creating the secondary market of
transaction-mining-capable hash power / BTC. It feels like some new game
dynamics arise in this setting, but I haven't run any numerical simulations
yet, though I'm going to do so.

2. Why is it possible to stop spam and DDoS of the network? The reason is
that to generate transaction proof-of-work user have to spend some physical
time (not money). After the user found out previous block hash he has two
choices: either to start doing some work (probably with the help of
transaction miners AND money) or instantly adjust fee at every moment (only
money). This adds a new signalling mechanism alongside standard fee market,
which will make it possible for miners to filter and do not propagate
transactions with PoW less than some handicap value (of course they can
always agree on some whitelist of non-spammers), thus preventing abuse of
spammer transactions with competitive fees to delay valuable and important
transfers of BTC.

Hope I addressed all the issues you mentioned.

On 22 June 2017 at 15:02, Conrad Burchert <[email-masked]>
wrote:

> As soon as there is competition for block space, people will likely
> outsource creating the proof of work on the transaction to "transaction
> miners". This would likely result in giving a fee to those transaction
> miners. If those are the same miners as those mining the block, we are back
> at the current system.
>
> Put in other words: We are already doing this, you are paying the miner
> for a piece of the proof of work of the block. If you want to mine instead
> of paying, just mine a block and use a part of the block reward to pay the
> fee for another transaction.
>
> This also does not work to prevent spam. Instead of paying the transaction
> fee you can just pay someone to mine proof-of-work on your spam
> transactions, resulting in roughly the same cost. There is no reason a
> normal user would be better in doing this than a spammer, likely it is the
> other way around as the spammer is a more reliable customer for a miner.
>
> 2017-06-21 11:55 GMT+02:00 Ilya Eriklintsev via bitcoin-dev <
> [email-masked]>:
>
>> Hello everyone,
>>
>> recently I have got an idea that in my opinion will improve bitcoin
>> network, making it better store-of-value for growing cyberspace and
>> cryptoeconomy. Sorry for longread below and thank you for your time.
>>
>> *Decentralized proof-of-work and DDoS resistance for Bitcoin*
>>
>> *Abstract*
>>
>> By introducing some new block validation rules it is possible to make
>> Bitcoin network more secure, decentralized and DDoS resistant. The idea is
>> to modify simple proof-of-work puzzle in such a way that user transactions
>> could be hardened with the same proof-of-work algorithm thus incentivising
>> all the miners to include that particular transaction. Such mechanism will
>> effectively give a handicap to every miner who includes "mined" transaction
>> into next block, increasing probability of him getting block reward.
>>
>> *Problems and motivation*
>>
>> This document will address the issue of a continuous DDoS attack
>> targeting the Bitcoin network, e.g. full nodes mempools constantly being
>> overflowed with transactions carrying small value reduce system primary
>> ability to transfer value (and hence making it perfect store of value).
>> Valid transactions are cheap to create (in the sense of computational
>> effort required) and no adequate mechanism exist to make transaction total
>> value increase probably of its confirmation by the network.
>>
>> Currently, miners decide which transactions to include in blocks because
>> it's them who are securing Bitcoin network providing proof-of-work
>> certificates stored inside every block header. Miners have to store the
>> whole blockchain at all times, so one of the costs is storage which grows
>> linearly with the transaction size (blockchain size as well). Another cost
>> is network bandwidth which depends directly on the size of data to be
>> communicated over.
>>
>> The only incentive a person who wants to transfer his bitcoins is allowed
>> to use is setting of transaction fee, that is going directly to the miner.
>> This solution probably was intended to utilize free market (as implied by
>> Satoshi introducing sequence numbers) to determine appropriate fees, but
>> that is obviously not the case, in the current bitcoin network operating in
>> full block capacity mode. This fee market deviates significantly from a
>> free market premise (also attempts being made to make it closer, e.g. in
>> BIP125 where Replace-By-Fee signaling is supposed to help in replacing
>> "stuck" transactions with noncompetitive fee).
>>
>> Currently, bitcoin network is susceptible to the DDoS attack of a kind.
>> Adversary creating and translating into the network a lot of transactions
>> carrying small value (e.g. only miners fee), will be able to impair the
>> ability to transfer value for everyone in the world, should he has enough
>> money to pay the fees. Miners would continue to work providing security for
>> the network and new blocks will consist of transaction transferring
>> negligible value. It's a major drawback because the cost of such attack
>> doesn't grow asymmetrically with the cost of BTC asset.
>>
>> *Proposed solution*
>>
>> So how do we incentivize all miners to include our transaction carrying a
>> lot of value in the next block? The only thing a miner supposed to do to
>> get a reward is to produce Hashcash proof-of-work, thus providing
>> cryptographic security guarantees for the whole Bitcoin blockchain. What if
>> including our transaction in a block would reduce effort requirements for
>> the miner produce valid block?
>>
>> We could do so by extending the concept of proof-of-work, in such a way
>> that we do not sacrifice security at all. Here are both descriptions
>> proof-of-work as-is and to-be:
>>
>> Standart proof-of-work: hash(previous block hash + current block target +
>> current block metadata + current block transactions) < target
>>
>> Decentralized proof-of-work: hash(previous block hash + current block
>> target + current block metadata + current block transactions) - sum( FFFF -
>> hash( previous block hash + raw_tx ) ) < target
>>
>> It is possible to imagine completely mining agnostic proof-of-work, for
>> example, the following PoW would do:
>>
>> Distributed (mining-agnostic) proof-of-work: sum( FFFF - hash( previous
>> block hash + current block target + current block metadata + signed_tx ) )
>> < target
>>
>> Described protocol change could be implemented as user activated
>> soft-fork (described in BIP148), introducing new blocks with the modified
>> proof-of-work concept.
>>
>> *Economic reasoning*
>>
>> An adversary whose goal is to prevent the network from transferring value
>> will have to compete with good users hash rate using same equipment good
>> miners will use. And it's far more complicated than competing with others
>> using the money to pay transaction fees.
>>
>> In order to investigate probable consequences of protocol upgrade and
>> stability of implied economical equilibrium, we need an adequate game
>> theoretical model. Such model and numerical simulation results should be
>> obtained and studied before any protocol change could be considered by the
>> community.
>>
>> To me it seems like a win-win solution for everyone owning BTC:
>>
>> Miners benefit: as the result DDoS attack will be stopped, Bitcoin
>> becomes perfect store-of-value finally. Political decentralization of hash
>> rate will be incentivized as mining equipment becomes relevant to every
>> user.
>> Users benefit: miners will have direct incentives to include transactions
>> deemed important by their sender and supported by some amount of
>> proof-of-work.
>>
>> Sincerely yours, Ilya Eriklintsev.
>>
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