Subject: [Bitcoin-development] Scaling Bitcoin with Subchains

From: Andrew <[email-masked]>
Date: Wed, 20 May 2015 02:55:49 +0000

Hi

I briefly mentioned something about this on the bitcoin-dev IRC room. In
general, it seems experts (like sipa i.e. Pieter) are against using
sidechains as a way of scaling. As I only have a high level understanding
of the Bitcoin protocol, I cannot be sure if what I want to do is actually
defined as a side chain, but let me just propose it, and please let me know
whether it can work, and if not why not (I'm not scared of digging into
more technical resources in order to fully understand). I do have a good
academic/practical background for Bitcoin, and I'm ready to contribute code
if needed (one of my contributions includes a paper wallet creator written
in C).

The main problem I see with increasing the block size limit is that it
increases the amount of storage required to fully validate all transactions
for say 100 years (a person's life). With 1 MB blocks, you can store all
lifetime transactions on a 5 TB drive, which basically any regular user can
do. With 10 MB blocks, you need a 50 TB drive, not accessible for regular
users. Yes, it's possible that in the future hard drive technology will get
cheaper and smaller, but this still didn't happen, so we can't just say "it
should be doable at the rate of Moore's law etc...", we need to know that
it is accessible for everyone, now. Also, don't forget that human life
expectancy can increase with time as well. I know, it sounds silly to use a
human lifetime as a measurement of how far back each user should be able to
store transactions for, but what is a better measurement? This is a
technology made for people i.e. humans, right, and the important part is
that it is for regular people and not just well privileged people. You can
search my last four emails for some more calculations.

What sipa told me on the IRC channel is that Bitcoin Core does not care
about old transactions. It only looks at the current blocks. Yes, that
makes sense, but how do you know that your machine wasn't compromised when
validating the previous blocks? And what if you want to check some old
transactions (assuming you didn't index everything)? What if some of your
old transaction data was lost or corrupted? I think it is clear that it is
useful to be able to validate all blocks (since 100 years) rather than just
a pruned part. It empowers people to have as much information about Bitcoin
transactions as do large data centers; transactions that may include
government or corporate corruption. This is the key to how Bitcoin enables
transparency for those who should be transparent (individual users with
private addresses can still remain anonymous). Also, 5 TB takes about 20
days to sync starting fresh, on a regular computer, so it allows easy entry
into the system.

So assuming we agree that people should be able to store ~ a lifetime of
transactions, then we need 1 MB blocks. But of course, this leads to huge
transaction costs, and small purchases will be out of limits. So to fix
this, I propose adding a 10 1 MB chains below the main chain (sorry on the
IRC room I said 10 10 MB chains by mistake), so effectively, you have a new
10 MB chain that is partitioned into 10 parts. You can also add a third
level: 100 1 MB chains, and keep going like that. The idea is that when you
make a large transaction, you put it through the top chain; when you make a
medium sized transaction, you put it through one of the middle chains,
which will be verified (mined) by the middle chain, and the top chain will
verify the aggregate transactions of the middle chain. If you have a small
sized transaction, you put it through one of the bottom chains, the bottom
chain verifies it, the middle chain verifies the aggregate transactions of
the bottom chain, and the top chain verifies the aggregate transactions of
the middle chain. By aggregate transaction, I mean the net result of
multiple transactions, and I suppose it can be 20 transactions belonging
only to one "sibling" chain for level 2, or 200 transactions for level 3,
etc...

Now, how does the system decide to which of the 10 chains the middle sized
transaction goes to? I propose just taking some simple function of the
input addresses mod 10, so that you can just keep randomly generating a
wallet until you get one with only addresses that map to only one of the 10
chains (even distribution), so that someone can choose one of the 10
chains, and store only the transactions that belong to that chain. They
should also choose a chain from level 3, etc... So in effect, they will be
storing a chain with block size O(n) where n is the number of levels. They
may store multiple sibling chains at one level, if they want to track of
other people's transactions, such as those of their government MP, or
perhaps, they want to have a separate identity that would be more anonymous
with a separate series of sibling chains. This will increase the storage
size, but the increase will be proportional to the number of things you
want to keep track of (at least this kind of system gives you the ability
to fine tune your storage needs to the level of "things" you want to keep
track of). Also, note that there may likely be duplication of transactions,
since transactions can include addresses that are associated with different
silbling chains, but this effect shouldn't make a big difference, and again
will depend on the complexity of the transactions you want to keep track of.

So how can this work? I propose that we keep the current chain as the top
chain, and then create 10 level 2 chains that also store Bitcoin and the
Bitcoin can be transferred between chains (I think this is the idea of
sidechains). How can we incentivize people to keep mining on the level 1
chain? Perhaps force it into the (soft fork) protocol that anyone mining on
level 2, has to also mine on level 1, and in general, anyone mining on
level n+1 has to also mine on levels n,n-1,...,1. Also, level 1 will have
the best decentralization, so there should be enough people paying fees to
get transactions there for their large transactions that require a high
level of security and trust. Even if people stop using level 1, any bitcoin
you own in the level 1 chain, can be transferred to level 2, and still you
have 1 MB blocks due to the partitioning scheme. How to prevent
transactions from clustering on one or a  few sibling chains in a
particular level? Well the more empty chains should have lower fees, so
that should incentivize people... Note: This system also allows for the
fine tuning of the transaction size to security ratio. Yes the lower chains
will be less secure, but a lower sized transaction does not need as much
security.

For instant transactions, there can also be Lightning channels linked to
whatever level of chain you want.

OK so it seems to me that this can work and would only require a soft fork.
But, as I said, I only have a high level understanding of the Bitcoin
protocol, so it feels kind of too good to be true, and I am ready for heavy
criticism. I am only writing this because I care about Bitcoin and I want
it to remain decentralized and become the best that it can be. I think it
is important to do the right thing rather than (as most people naturally
do) the most convenient thing.

Thanks

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