Tackling the Scalability Trilemmaby@terrywangiost
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Tackling the Scalability Trilemma

by Terrence WangJuly 31st, 2018
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For the last several years, blockchain projects have been grappling with what has come to be known as the scalability trilemma. Trying to find a balance between scalability, security and decentralization isn’t easy, and many projects have been cutting corners too much in one area, and therefore compromising the integrity of their blockchain. At IOST, we are working to develop the technology to solve this problem, and introduce a truly functioning decentralized infrastructure!
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The success of the IOST blockchain is an inseparable mixture of technological invention and community support. At the end of June we released the first version of the IOST test network, Everest 0.5. With the parameters of verifying the POB consensus mechanism, it has reached a peak of 8000 TPS in live environment testing, making Everest’s TPS 400 times faster than Ethereum and 8 times faster than EOS.

Since we were able to achieve our initial goals on the technological front, our core engineering team has committed to creating more content to explain our development thought processes and the various approaches we are taking to tackle the biggest challenges for the blockchain industry.

We will be producing monthly thought pieces and in-depth dialogue opportunities with the core engineers of the development team to talk about our initial focus, technical difficulties, development concepts, and things you don’t normally about engineers. We believe that this technology discussion will allow for us to share the wisdom we have accrued through this incredible building process and help push the blockchain community to ever greater heights.

For the last several years, blockchain projects have been grappling with what has come to be known as the scalability trilemma. Trying to find a balance between scalability, security and decentralization isn’t easy, and many projects have been cutting corners too much in one area, and therefore compromising the integrity of their blockchain. At IOST, we are working to develop the technology to solve this problem, and introduce a truly functioning decentralized infrastructure!

IOST is a blockchain platform for decentralized applications that offers a powerful way to develop community-owned networks and provide a level playing field for 3rd-party developers, creators, and businesses. We believe that Centralized platforms have been dominant for too long, so long in fact that people have forgotten there is a better way to build internet services, the original open source approach. In order to diverge from this centralized path, IOST is working to actually solve the blockchain scalability trilemma, rather than skirting around the issue and resorting to centralization in a short term bid for market dominance.

The Scalability Trilemma

IOST increases transaction performance without sacrificing key properties of decentralization, i.e. censorship resistance, open participation, and immunity from certain attacks. It is more decentralized than systems like EOS, while more scalable than smart contract platforms like ETH. IOST has the following five unique characteristics:

Censorship Resistance

In the context of the scalability trilemma, IOST favors decentralization. More specifically, IOST gives greater weight to censorship resistance over scaling. The IOST blockchain maintains censorship resistance, open participation, and immunity from certain attacks even as we experiment with different scaling solutions. Every node in the IOST blockchain has a fair chance of being elected to the committee to participate in producing blocks and validating transactions. PoB allows this to occur without making any sacrifices on other fronts.

It is commonly argued that in order to ultimately be successful and see mainstream adoption of these platforms, networks must be able to compete with Visa-level throughput because no one wants to use applications in which interactions take days, hours, or even several seconds. This is a dangerous claim. The argument is right in the sense that blockchain needs to have comparable performance as centralized services, but it fails to understand that performance cannot be achieved at the cost of decentralization.

What the argument fails to take into account is the fundamental value that blockchains actually provide, namely censorship resistance. If blockchain platforms do not provide censorship resistance — then they have to rely on a set of trusted actors to produce and validate blocks, such as EOS —which simply translates to a return to legacy database systems, albeit at the expense of the efficiency that legacy systems like Amazon Web Services or Microsoft Azure provide.

Why is censorship resistance important?

The censorship resistant nature of the Bitcoin blockchain means that anyone can hold value in BTC without the risk of it being seized by a malicious actor, agency or regulator. Eric Meltzer from INBlockchain captures the value of censorship resistance succinctly in the following quote:

“I find the existence of basically unseizable money outside of state control massively comforting. The state is an unpredictable monster that flips out every century or so. Having the ability to leave without leaving everything behind is key.”

Of course, censorship resistance has valuable applications beyond monetary assets. IOST recognized this through the design of the system. Instead of having a static set of nodes, IOST has a dynamic and reputation-based committee for validating transactions and producing blocks. Every node in our blockchain has a fair chance of being elected to the committee. It allows developers to build censorship resistant applications and smart contracts. If you enter into a smart contract with another party it is important to be comfortable knowing that neither the record of the contract nor the rules can ever be tampered with at your expense. If your identity — social security number, credit information etc. — exists within smart contracts, it is crucial that you can be certain specific actors can never interfere with your information.

Some people have argued that DPoS-based blockchains are censorship-resistant. But since the very recent launch of EOS mainnet, censorship has already taken place. The ‘EOS Core Arbitration Forum’, (ECAF) a newly made up centralized party, has ordered all block producers to freeze 27 accounts on the network. They did so while saying “The logic and reasoning for this Order will be posted at a later date.” The freeze command was given by a man named Sam Sapoznik, and followed without questions by all super nodes. It is pointless to use a blockchain without its censorship resistance qualities, as decentralization becomes non-existent and anything on the blockchain can be distorted.

Until now, a few new rules have been added to the EOS constitution. This addition is without any decentralized decision-making process. This has been done to give the ECAF and its infinite discretion to make binding decisions some degree of validity. Censorship in EOS is ‘constitutional’ now. This goes against everything that crypto was first created for.

The difference between centralized and decentralized systems)

Algorithmic Election Committee

The IOST blockchain uses algorithms to select validation committees based on their contribution to the community and the tokens they hold, rather than using a system of on-chain voting like most blockchains based on the DPoS mechanism.

The voting committee on the chain is seriously flawed. This mechanism attempts to replicate the conditions of representative democracy, but to quote Vitalik Buterin, “the one-person-one-vote system of representative democracy has been replaced by a system of one-vote and one-vote.”

Such a system will undoubtedly eventually evolve into a stratified system where the rich rule. People with more capital vote will be able to continue accruing capital, so that those with fewer voting rights will become more and more disenfranchised because their vote has little or no effect on the election results. From the history of blockchain development, the blockchain managed by manual voting mechanism has a participation of <15%, such as DAO carbonvote, EIP186 carbonvote, DAO proposal voting, and 2014 Bitshares DPOS voting. In the IOST system, the Block Producers (BPs) committee assigns algorithms based on contributions and balances, each with the same responsibilities and rights.

At the same time, the “tragedy of the commons” may also occur in blockchain voting.

Since each voter has a very small chance of affecting the outcome of the vote, they are motivated to vote thousands of times less than ideal. This means that it is very likely that everyone will put their tokens on the exchange and the exchange will vote on their behalf, and these users will not really care about how the exchange uses their money to vote. This situation will lead to a trend of voting centering.

Another problem is that voters become receptive to bribes from super nodes, who can buy votes in return for some share of their annual rewards. Super nodes are encouraged to collude amongst each other so that they can fix the rate at which they will share rewards with voters.

Since incentives exist to buy votes. Once elected, all super nodes (or Block Producers, BPs) will want to remain in power. Therefore, there is an incentive to maintain the established order, which means elected block producers will form alliances to vote for each other. In Lisk, a cryptocurrency using a very similar DPOS system as EOS, this has led to the emergence of two very powerful maffia-like coalitions: Elite and GDT. On the other hand, IOST uses a model of dynamic committee for validating and producing blocks which intentionally prevent coalitions formation. If a node produces a block, the node needs to “cool down” for a period of time to participate again.

Once such coalitions are formed, decentralization of the blockchain platform will be non-existent. The coalitions can even start extorting businesses building on EOS in various ways. Not only transactions can are censored by the cartels unless it behaves in a certain way or pays money to BPs, but censorship can be hidden. The BP cartels could for example make it more difficult for a specific business to function, through small changes in how the network works. After all, decisions on what is allowed or not on the network are in the hands of the cartels.

By censoring in an indirect, hidden fashion, any possible public backlash is minimized. After all, the only thing that the BPs will have to do is provide an explanation of why they made the protocol changes. As long as this justification is plausible enough to get away with the generally uninformed public, we wouldn’t even know if any extortion is going on.

Equal Distribution of Economic Rewards

In PoS, larger and older holders of coins have a higher probability of signing the next block. Although computing power is saved compare to POW, richer users will gain wealth much faster than others.

The PoB system not only rewards those with a some account balance, but also takes into account how many contributions they have made to the community. Contributions factor in verified transactions, more computational contributions and resource contributions and we are currently testing additional factors.

This means that those who actively help the economy and promote the whole network, and therefore benefit the greater community, are rewarded. Contributions made by users are measured by Servi. User’s Servi balance plus the tokens balance staked determines the user’s believability score. The higher it is, the more chance they have of being elected in the committee.

POB consensus has a unique design in that Servi are self-terminating. This means that after validating a block, the system will automatically clear the Servi balance owned by the user. So, both nodes with high and low scores can take turns validating blocks. This ensures a fair block rewards giveaway.

The good thing about POB is that this will mean much more even wealth distribution; basically anyone who contributes will have a fair chance to gain IOST; new people who just joined the network can gain rewards on an equal level with people who joined the network long ago.

This is an important egalitarian concept, because it gives similar opportunities to everyone. IOST aims to empower regular people and provide a blockchain of opportunities for everyone. Nodes are not that different and everyone could become a supernode by contributions. The system is designed to give equal and fair chances for all participants.

Security Design for Proof of Believability (POB)

The Proof of Believability (POB) consensus mechanism extends the traditional PoS concept wherein nodes need to accumulate a large number of tokens in order to be eligible to participate in the creation of a new blockchain, and determines the probability of producing blocks based on the ratio of a certain value. In PoS, this value is the total amount of tokens accumulated or given by a node, and in the Certificate of Confidence (POB), this score contains more variables. Applying the mathematical calculation ideas of network clustering and page ranking, the credibility score is mainly determined by the following factors:

Proof of Believability solves two major flaws with PoS.

First, that in PoS a node will accumulate as much virtual currency as possible and continue to win rewards from block production. This concentrates the wealth within the platform and hinders the flow of tokens. With the PoB consensus mechanism, simply accumulating wealth without helping to produce and disseminate transactions leads to lower credibility scores, which can help IOST circulation increase credibility.

Second, is the nothing-at-stake problem. Because block creation does not require resources, when there is a fork, the node can freely create a new block on the two forks, which will extend a certain point in a great or infinite way. A Certificate of Confidence (POB) can take advantage of the “binding margin” of a margin guarantee to prevent this from happening. As mentioned above, the credibility score for each node includes the tokens that the user mortgages. In order to be able to unlock these bound token deposits, the user must first initiate the unlock margin process and then wait for a longer time interval, the so-called ‘unbinding period’. This also gives all users an idea of ​​how the verification committee will change in advance. Without this “unbinding period”, the node would be vulnerable to attacks from the original verification committee, and in fact the verification committee may no longer exist.

Capacity Expansion (Scaling)

As we have discussed, scalability is ultimately required if these platforms are to actually reach a mainstream audience and realize all its revolutionary promises. But scalability shouldn’t come at the cost of sacrificing censorship resistance.

IOST’s solution is to actually solve the scalability trilemma rather than skirting around it by reducing blockchain to a centralized database system.

We are trying to do this through various protocol-level and layer-2 scaling solutions including: channels, sharding, and sidechains.

We believe that the protocol-level and Layer-2 protocols are the two main ways to improve blockchain scalability. The protocol layer includes the establishment of a better-designed underlying blockchain protocol. As we have seen in the existing simple blockchain design, it maintains the expected decentralization and security features of most blockchains. It only requires a small percentage of nodes to see and process each transaction and allows more transactions to be processed in parallel at the same time. The Layer 2 protocol (Layer2) includes the creation of a chain-down protocol that sends most transactions to the chain and only occasionally interacts with the upper layers of the chain to enter and exit from the Layer-2 system. This also applies to defense against attacks on the system. Case. We believe that these two strategies complement each other. We support a multi-pronged strategy to improve the expansion of IOST, that is, to allow these two strategies to interact with each other and complement each other.