Bitcoin is a cryptocurrency as well as a peer-to-peer blockchain technology that is open source. It was created in 2009 and is widely regarded as the most successful digital currency in history. Satoshi Nakamoto is the alias used by the creator. The actual identity(ies) behind it remain unknown. Bitcoin, unlike previous digital currencies, is decentralized and open (permissionless).
This implies that transactions are not recorded by a central organization, but rather in a public chain of blocks known as the blockchain. Anyone may add transactions and help with validation. Proofs of work (PoW) must be produced in order to do so.
The blockchain blocks are public listings of transactions that are linked together to create a chain. Transaction history cannot be altered. To avoid possible assaults, the insertion of blocks is made computationally difficult. Prospectors donate computer power to the project. Incentives are provided via bitcoin coins as rewards.
As long as honest parties provide more than half of the computer power required to perform these tasks, the blockchain serves as a strong and tamper-proof registry that records all Bitcoin transactions. “Despite its enormous success, the system is faulty, putting the long-term sustainability of cryptocurrencies into doubt,” argues Professor Krzysztof Pietrzak.
He is the director of the cryptography group at the Institute of Science and Technology (IST Austria) and a member of the Chia Network. Bram Cohen, the CEO of Chia and the creator of Bittorrent, is developing a sustainable cryptocurrency based on concepts from his fundamental research.
The environmental issue is also the most urgent. The computations need massive energy consumption, and the energy is produced using fossil fuels, depending on the location of the gear. This results in CO2 emissions. According to Digiconomist, this now amounts to 81.8 million tons per year, which is approximately equal to Romania’s CO2 footprint.
Furthermore, the central processing and control unit (CPU) of a computer is inefficient in searching for blocks. Specialized hardware is more energy efficient and uses less power. Meanwhile, major players are using this gear, undercutting the democratic decentralized claim. Nakamoto’s initial concept of ordinary people mining Bitcoin with their spare CPU cycles could not be fulfilled.
This is because the power expenses of standard CPUs are considerably greater than the anticipated profit. High premiums as an incentive for Bitcoin prospectors are likely to become problematic in the long term since they lead to either currency inflation or high transaction costs. In a paper published in 2013, the cryptography group at IST Austria suggested an alternative proof method for a decentralized money system: proof of space (PoSpace).
Unlike proof of work (PoW), this is dependent on free storage space rather than continuous calculations. This alternative design addresses all of the problems stated above: it is considerably more efficient and enables all players to search for blocks in a virtually resource-neutral way.
Furthermore, the resources of empty disk space are vast and may be found in both data centers and personal laptops. As a result, they may be used for prospecting by anybody at virtually no extra expense. To allow block searching, the storage space just has to be initialized once.
“In a blockchain like Bitcoin, you can’t simply substitute Proof of Work with Proof of Space; that would be totally unsafe,” Pietrzak says. Instead, the researchers created their own blockchain, dubbed Spacemint. However, much study was required before it could be applied in earnest.
The technological issue was to provide security that was at least comparable to Bitcoin — given that the bulk of storage is controlled by trustworthy people. One of the issues that had to be addressed with Spacemint was ensuring the security of the blockchain in the face of dynamic availability.
To protect the blockchain, storage space is used. The security of the blockchain is jeopardized if there are significant variations in the availability of storage capacity. One of the challenges that Spacemint faced was ensuring the security of the blockchain in the face of dynamic availability.
To protect the blockchain, storage space is used. The security of the blockchain is jeopardized if there are significant variations in its availability. Dynamic availability, on the other hand, is not an issue with PoW-based Bitcoin, because processing power is utilized to protect the blockchain. This became clear as Bitcoin’s processing power grew by orders of magnitude in a few of years.
In addition, the earliest proofs of space included an interactive initialization step, which proved essential. “In the context of blockchains, this implies that a prospector must first register the storage space it intends to utilize,” Pietrzak explains.
This is accomplished on the PoSpace blockchain by use of a specific transaction that is recorded in the blockchain. This is troublesome because a majority of current prospectors, for example, may opt to discontinue accepting new registrations.”
Meanwhile, PoSpace is used by at least two significant blockchain projects: the decentralized storage network Filecoin and the blockchain Chia. The aforementioned issues may be resolved in collaboration with Chia. Bittorrent and Chia inventor Bram Cohen proposed integrating PoSpace with proofs of time. A mechanism that is now referred to as unique proofs of sequential work or verifiable delay functions. The cryptography group at IST Austria addressed the issue of interactive initialization by creating a new type of PoSpace.
According to Pietrzak, it is unlikely that PoSpace will become the prevailing norm in blockchain technology, but it is feasible: “It should be obvious by now that proofs of work are not a forward-looking solution.” A few quite distinct systems will most likely operate in parallel in the future.
Proofs of stake are currently the best-studied option for open blockchains (PoStake). However, building a blockchain based on this is challenging. Ethereum has been attempting to convert to PoStake for over five years, but has so far failed owing to technological difficulties. Experts like as Bram Cohen believe that a “PoStake-based open blockchain cannot function for basic reasons.”
In any event, the cryptography group at IST Austria will continue to work on PoSpace and deal with difficult problems. For example, there is still a need for verified delay functions that can be used in future scalable quantum computers. The researchers also advocate for a shift away from the concept of truthful participation.
Currently, they can only demonstrate that a blockchain like as Bitcoin, Chia, and others are safe if a majority of the resources are owned by people that act honestly, that is, comply to the protocol. “It would be more reasonable to presume that the parties are not honest, but rational,” says Pietrzak. “For bitcoin prospectors, this implies they are attempting to maximize their earnings.”