Proof of Work
The most famous and well-known coins, such as Bitcoin and Ethereum, although their differences, use a consensus algorithm called Proof of Work, in which an extraordinary and expensive computing power is put in place, spent to calculate complex mathematical elaborations, in order to create and validate a block of transactions.
This activity is called mining.
The main purpose of this and other algorithms is to elect a leader, a mining node, who decides the contents of the next block and its transmission to the network, so that everyone can verify and record the validity of its contents.
In order to elect a node as a leader, it is necessary that it finds a solution to a mathematical problem and that all the nodes in the network recognize the correctness of the resolution. In this way, the miner will receive a reward, both for the mined block and for the transaction fees, and therefore it will have an incentive to continue mining.
Thanks to the extraordinary (and necessary) computational power, miners are also encouraged not to cheat: attacking the network would cost a lot, because of the high costs of the hardware, the energy involved and the potential mining profits that would be lost.
Proof of Work has proven to work quite well, the Bitcoin blockchain for example has never been violated, although Proof of Work is not democratic, because here the winner is the one who has more computational power to put into play. Despite all this, the network does not process more than 10 transactions per second, which are incomparable, for example, to those made by Visa and MasterCard.
Proof of Stake
The Proof of Stake is a modern approach to the generation of blocks and therefore to the consensus of the transactions contained within it. Instead of consuming electricity to solve computationally expensive calculations, a node is selected to generate a new block. In this way the probability is proportional to the amount of coins kept in the wallet, in order to be selected to generate new blocks. However, in the well- known Proofs there are some problems that have reated vulnerabilities, some of them already solved and others being solved.
In many Proof of Stake algorithms (all chain-based), rewards are awarded for block production only. As negative consequence, if there are multiple competing chains, a validator may be encouraged to validate multiple blocks and on each chain; consequently, the Blockchain may never reach consensus, even if there are no declared attackers.
The problem can be solved by penalizing validators if they simultaneously create blocks on multiple chains, but they must be detected well in advance, otherwise a validator with Stake could point to both chains.
However, for the process to work properly it is necessary that validators are selected at a time before the fork: this can be considered a point of weakness, because the nodes must often be online to get a secure view of the blockchain, exposing themselves to the risk of attack by malicious validators.
In this condition, if at least 2⁄3 of the validators are honest, agree on the same transaction register and calculate the same status, then the network is secure and the nodes can send transactions and benefit from the economic purpose.
This condition is called Byzantine theory.
Although there is not a sufficiently broad record to demonstrate the functional value of the PoS algorithm,there are some variables that could trigger 51% attack conditions, particularly related to economic incentives and block validation.
As we said, Takamaka’s algorithm is a Proof-of-Stake that responds to the possible PoS security problems; to all intents and purposes, it is an adaptive algorithm, that sets unique and precise conditions to undermine the block, related to the following conditions:
At the end of the first third of an EPOCH, a seed is generated with precise randomness characteristics; although it is a deterministic calculation, this procedure is fundamental and serves to establish when a node, activated as miner ( see below “Election of a miner”) , will have to undermine a block in the next EPOCH.
In Takamaka there is no substantial competition between Network nodes to determine who becomes the miner, miners compete exclusively on the efficiency value where the node creates a block. Takamaka’s algorithm divides the physical time in EPOCH, equal to the duration of 8 days and 8 hours,
which in turn is divided into SLOT, whose relatively short time has a value of 30 sec. and where inside each slot is generated a block of 10,000 Tx.
In each subsequent EPOCH, it is always known who the miners will be. Unlike the more well-known Proof Of Stake, here there is no substantial competition between the Network nodes to determine who becomes miner, like for example in the most energy-intensive, such as PoW (bitcoin type) or in the Proof of Stake BFT (tendermint, cardano ouroboros, etc. ).
In Takamaka miners compete exclusively on the efficiency value in which the node creates a block, rather than on the number of transactions it includes.
The more quickly a node can vote to make a call, the faster and more efficient it is defined, independently the maximum delay of the network, or the minimum and/or maximum level of availability of stakes on the node.
Unlike OUROBOROS and/or Tendermint, the Takamaka PoS algorithm seeks consensus regardless of the vote, it is not necessary to vote or elect a Leader to start undermining the block, nor is it necessary for the nodes to speak to each other to create consensus.
Election of a miner
At the end of the first third of an EPOCH, the algorithm generates a seed, with intrinsic deterministic randomness characteristics, so that everyone is able to calculate it. Depending on the choice made by the seed and the amount of stake bet on a node, it is automatically determined who will produce the block that will go into the next EPOCH slot.
Therefore, Takamaka Proof-of-Stake is not a PBFT, so when a node generates a block, it must not consult anyone else to become a mining node, but simply be aligned with the heaviest story of the chain. The node initially has only one block of bootstrap, from which it undertakes to reconstruct the whole
story, simply asking the adjacent nodes, in order to rebuild everything.
To understand what the exact story is, the node verifies in that EPOCH which chain is heavier, i. e. has more bets; the chain that has more weight and therefore more stake is undoubtedly the “exact story”, in normal conditions no one would follow a chain with a lighter story, because it would mean that it is following the wrong story, putting at risk bets and economic rewards.
In Takamaka PoS a node is never penalized, but simply does not earn.
Moreover, here it is not foreseen that there can be bets on the single node, higher than a certain value dictated by the protocol. In this way it is guaranteed that the node has a minimum value to be able to become a delegated miner, but also limited to prevent it from assuming a predominant role in the network, a necessary condition for the status of equilibrium.
Let’s suppose that the network splits into two Chains, which present millions of similar stories, but each one with a different importance; in this condition the story that wins is always the one that has more weight, so that is not the Fork.
If you commit to recognize an alternative story, you may not be rewarded if that chain turns out to be a fork. At the end of the EPOCH, all the nodes will evaluate which is the less heavy story and this will be considered as a fork and then rejected. Those who have bet on the wrong story will not be penalized, but simply not paid.
In the Takamaka PoS consensus protocol, it is considered a fork, when it significantly alters the functioning of the client (node), which changes the rules of chain mining. At this point, if a node respects the rules, it can immediately begin to undermine the block, which will be generated and sent to the entire network, creating the conditions for a reward and laying the foundations for the construction of the chain.
Whoever receives the block adds it to the chain, which grows with the weight of the Stakes on the EPOCH one, in this way the condition that the story of maximum weight creates a chain of maximum weight is valid.
The Takamaka algorithm is to all intents and purposes a Proof of Stake (PoS), which does not rely on demanding hardware and high current costs, but it focuses the economic effort directly on the protocol.
In order to solve the problem, Takamaka has patented its consensus algorithm, challenging the most famous Blockchain projects and presenting itself as a protocol of different value, not only towards Ethereum, but also towards other platforms on which Smart Contract are programmed and realized.
The result is a chain that is almost immune to compromises, typical of Proof of Stake algorithms, solving and setting solutions that promote and improve the current limits. It offers an high security level like the most famous Proofs, but, compared to these, it overcomes problems related to energy consumption of
resources and impartiality.
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