ByzCoin - an innovative solution

Transactions on blockchain, the virtual accounting book

Bitcoin is one of the most well-known virtual currencies. It has been commonly used to pay on the Internet and on alternative networks, in a similar way to traditional financial transactions made from one account to another since 2009. Each transaction is inscribed on the "blockchain", a virtual accounting book, which is shared among all users and contains all exchanges ever conducted.

To be finalized and confirmed, a transaction must be included in a block. This is the work of the "miners", special computers that run specific software intended for "mining". These computers are part of a network that takes each new transaction and assigns it to a corresponding block by following cryptographic rules. Each assignment must then be verified by a part of the network and, once verified, the blockchain is automatically updated.

Inconsistencies and attacks

The execution speed of any given transaction depends directly on the network of miners. In case of insufficient resources to process the transactions, they are simply put in queue until a miner can process them.

As the transaction volume has increased significantly due to the system’s unexpected success in recent years, the queuing time has consequently increased. The growing popularity of these virtual currencies has led to dishonest hackers using them as prime targets. So much so that, as flaws related to the long confirmation time were discovered, they allowed the successful use of the same units of currency more than once (Double Spending) or to undermine the integrity of the network (Selfish Mining).

In addition to this, inconsistencies between the latest blocks of the blockchain may arise when two transactions are confirmed almost simultaneously. In such cases, the incorrect section of the two blockchains is erased, leading to the cancellation of the payments, sometimes even several hours after confirmation. This type of behaviour prevents the currency to be seen as a reliable means of payment, replacing traditional credit cards and other payment systems, such as PayPal.

ByzCoin - towards an effective solution

ByzCoin, developed in the Decentralized and Distributed Systems Laboratory in IC School, is a solution allowing a quick and irreversible confirmation to a Bitcoin transaction within seconds. The ingenious idea behind it is to create an active group of miners that uses novel cryptographic algorithms to work collectively on transaction blocks. Inspired by protocols such as the Practical Byzantine Fault Tolerence (PBFT), the miners would now only require the approval of two thirds of the other members of the group they belong to for each transaction to be processed.

This approach, when applied to Bitcoin, would guarantee a higher level of consistency within the blockchain, would make the transactions irreversible, and would enable a much higher transaction processing speed. All of these properties greatly reduce the possibility of attacks, increasing thus the reliability of the currency with the aim of gaining the trust of even the most reluctant users.

The proposed solution, while solving many of the problems Bitcoin is currently facing, is not yet implemented in the current network. Indeed, prior to using the new system, a large number of the miners has to adopt it. For this to be achieved, the mining software would have to support initially both the current and the new protocol. ByzCoin does not however intend to stop at improving only Bitcoin. The solution could potentially be applied to all decentralized virtual currencies, which are based on a blockchain.

The researchers of the Decentralized and Distributed Systems Laboratory are currently exploring techniques to further scale the ByzCoin system, which would enable to increase the transaction throughput from hundreds, as currently provided by ByzCoin, to thousands of transactions per second. This would elevate ByzCoin on the same level as many of the major classic payment networks, like VISA, which process 2000-4000 transactions per second on average. There is no doubt that with the rise of all things digital, a bright future awaits this revolutionary solution.

Reference
Eleftherios Kokoris-Kogias, Philipp Svetolik Jovanovic, Nicolas Gailly, Ismail Khoffi, Linus Gasser, Bryan Ford. Enhancing Bitcoin Security and Performance with Strong Consistency via Collective Signing. Usenix Security 2016.