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

From: Ilya Eriklintsev <[email-masked]>
Date: Wed, 21 Jun 2017 12:55:22 +0300

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.