Bitcoin Meets Strong Consistency (1412.7935v1)

Abstract: The Bitcoin system only provides eventual consistency. For everyday life, the time to confirm a Bitcoin transaction is prohibitively slow. In this paper we propose a new system, built on the Bitcoin blockchain, which enables strong consistency. Our system, PeerCensus, acts as a certification authority, manages peer identities in a peer-to-peer network, and ultimately enhances Bitcoin and similar systems with strong consistency. Our extensive analysis shows that PeerCensus is in a secure state with high probability. We also show how Discoin, a Bitcoin variant that decouples block creation and transaction confirmation, can be built on top of PeerCensus, enabling real-time payments. Unlike Bitcoin, once transactions in Discoin are committed, they stay committed.

• The paper introduces PeerCensus, a framework that extends the Bitcoin blockchain to provide strong consistency for applications by blending blockchain methods with Byzantine agreement protocols to manage dynamic peer identities securely.
• Discoin is presented as a Bitcoin variant built on PeerCensus, demonstrating how to achieve real-time transaction confirmations by separating block generation from transaction confirmation using a Byzantine agreement protocol for finality.
• The security analysis indicates PeerCensus is robust against Sybil attacks and churn, maintaining a secure state with high probability, which suggests the framework's potential for creating scalable, resilient blockchain systems prioritizing consistency and speed.

Bitcoin Meets Strong Consistency: An Overview

The paper "Bitcoin Meets Strong Consistency" proposes an innovative system called PeerCensus, designed to enhance the Bitcoin blockchain by offering strong consistency. The authors—Christian Decker, Jochen Seidel, and Roger Wattenhofer—aim to address the inefficiencies related to Bitcoin's eventual consistency model, which impedes its practical application for real-time payments. This essay explores the intricacies of their system, analyzes the proposed Discoin variant, and discusses the implications and future directions of this research.

Background and Motivation

Since its introduction, Bitcoin has gained significant popularity, yet remains impractical for instant transactions due to its eventual consistency, characterized by confirmation delays and vulnerability to double-spending attacks. In line with traditional cryptocurrencies, Bitcoin transactions require several minutes to achieve confirmation due to consensus mechanisms, thereby limiting its usability in real-world, instantaneous transactions. Bitcoin's vulnerable period, affected by issues such as blockchain forks, necessitates a reformulation of its underlying architecture.

PeerCensus Framework

To overcome these challenges, PeerCensus is introduced as a certification authority extending the Bitcoin blockchain to create applications with strong consistency. It utilizes an innovative blend of blockchain technologies and Byzantine agreement protocols to efficiently manage peer identities. At its core, PeerCensus addresses the following challenges:

1. Openness: Unlike traditional consensus protocols reliant on a fixed participant set, PeerCensus effectively manages peers whose eligibility changes over time.
2. Sybil Attacks: Through identity verification, PeerCensus mitigates the risk of Sybil attacks, whereby malicious entities could disrupt the system by generating multiple identities.
3. Churn: With dynamic peer participation, the required quorum size for consensus should adapt accordingly, unlike protocols assuming a stable configuration.

PeerCensus comprises three layers: the Blockchain layer leveraging Proof-of-Work to regulate identity, the Chain Agreement layer providing strong consistency, and an Application layer for implementing secure applications.

Discoin: Strongly Consistent Bitcoin

Discoin, a Bitcoin variant constructed on PeerCensus, illustrates the concept's practical application. In contrast with traditional Bitcoin, Discoin enables real-time transaction confirmations by separating block generation from transactional confirmation. The possibility of an irreversible transaction ledger underpins Discoin's forward security property, making it suitable for financial applications where transaction reversibility is undesirable.

The researchers ensure transaction finality through a Byzantine agreement protocol that processes operations atomically and orders transactions sequentially. In addition to expedited transactions, Discoin distributes rewards among all participating nodes, eschewing reliance on block finders and addressing centralization and mining pool dominance concerns inherent in Bitcoin's current model.

Security Analysis and Experimental Insights

The paper rigorously examines the security of PeerCensus, especially concerning its vulnerability to Sybil attacks. By employing a formal resource and membership churn analysis, the researchers assert that PeerCensus maintains a secure state with high probability, boasting an expected failure interval measured in millions of years under realistic operational assumptions.

Implications and Future Directions

The PeerCensus and Discoin frameworks present substantial advancements in blockchain systems. By establishing a robust framework for real-time transaction validation and consistent ledger management, the innovations could drive decentralized currencies closer to conventional banking efficiency. Future research could explore adapting the framework to other blockchain-dependent systems, facilitating cryptocurrency interoperability, and enhancing user anonymity and privacy.

Ultimately, this paper contributes to the design of scalable, resilient blockchain systems with real-world applicability, potentially setting a standard for next-generation cryptocurrencies that prioritize consistency and speed.