BlockReduce: Scaling Blockchain to Human Commerce (1811.00125v1)

Abstract: Blockchains have shown great promise as peer-to-peer digital currency systems over the past 10 years. However, with increased popularity, the demand for processing transactions has also grown leading to increased costs, confirmation times, and limited blockchain utility. There have been a number of proposals on how to scale blockchains, such as Plasma, Polkadot, Elastico, RapidChain, Bitcoin-NG, and OmniLedger. These solutions all propose the segmentation of every function of a blockchain, namely consensus, permanent data storage, transaction processing, and consistency, which significantly increases the complexity and difficulty of implementation. BlockReduce is a new blockchain structure which only segments consistency, allowing it to scale to handle tens of thousands of transactions per second without impacting fault tolerance or decentralization. Moreover, BlockReduce will significantly decrease node bandwidth requirements and network latency through incentives while simultaneously minimizing other resource demands in order to prevent centralization of nodes.

• The paper’s main contribution is a novel hierarchical design that boosts blockchain throughput to nearly 50,000 TPS without compromising decentralization.
• It introduces a three-tier structure (PRIME, regions, zones) that employs merge-mining and efficient data propagation to minimize bandwidth usage.
• The approach demonstrates how optimized PoW incentives and network efficiency can scale blockchains to support global commerce.

Analysis of "BlockReduce: Scaling Blockchain to Human Commerce"

The paper presents BlockReduce, an innovative approach to improving blockchain scalability. Addressing the enduring challenge of scalability in blockchain systems without sacrificing their core properties is of paramount importance. The research focuses on achieving significant throughput enhancement by conceptualizing a unique Proof-of-Work (PoW) managed hierarchical structure that avoids the pitfalls of centralized power and maintains key blockchain attributes such as fault tolerance, decentralization, and economic sustainability.

Problem Statement and Need for Scalability

The limitation of existing blockchain infrastructures to process more than around 10 transactions per second (TPS) is a critical constraint. As blockchain technology aims to disrupt traditional hierarchical models of organization through peer-to-peer decentralization, efficient scalability has remained elusive. Numerous proposals have been put forth, each with its flaws that either compromise Byzantine fault tolerance or introduce complex organizational models potentially undermining decentralization.

BlockReduce Architecture

Hierarchical Blockchain Structure

BlockReduce introduces a three-tier hierarchy consisting of PRIME, regions (A-Z), and zones (i-k), which collectively work to increase throughput. While PRIME handles global consistency, regions and zones process transactions locally. This new structure leverages a merge-mining approach, allowing concurrent mining across different levels. This theoretical setup asserts that scaling can be achieved from the current capabilities to somewhere in the vicinity of 50,000 TPS, effectively scaling blockchain throughput by orders of magnitude without deteriorating its inherent properties.

Network Efficiency and Bandwidth

The methodology effectively addresses network bandwidth bottlenecks through innovative transaction segmentation and aggregation techniques. These techniques apply enhanced data propagation strategies utilizing a structured system of subdivisions and data-interlinking. The transmitted data is minimized by propagating transaction hashes instead of entire data sets, enhancing propagation efficiency and achieving reduced bandwidth consumption when compared to conventional architectures.

Consistency and Merge-Mining

Consistency is recalibrated as a precursor to consensus, achieved locally within smaller networks (zones and regions) before leveraging the global scope (PRIME). The hierarchical PoW mechanism incentivizes network efficiency through auto-balancing incentives, rewarding miners for achieving consistency with minimal latency, and optimizing network constraints.

Implications and Future Directions

The implications of BlockReduce could profoundly affect practical applications, enabling blockchains to fulfill the transactional demands akin to global commerce scales. The theoretically reduced bandwidth, coupled with efficient network resource utilization, proposes a compelling solution that addresses both immediate performance requirements and long-term economic sustainability. Additionally, this structure's ability to align user nodes into efficient zones holds potential for naturally evolving economic interactions, mirroring the dynamics observed in fiat currency systems.

For future developments, the theoretical model requires substantial empirical validation to ensure real-world applicability. Furthermore, exploration into modifying the node operating mechanisms and incentive structures could offer variants with enhanced capabilities tailored to specific applications. Overall, BlockReduce proposes a sophisticated yet potent concept that could adjust the trajectory of blockchain scalability debates and solutions.