Distributed Consensus: Beyond POW or POS

At the heart of Bitcoin or any Blockchain ledger is a distributed consensus mechanism. It’s a lot like voting. A large, diverse deliberative community validates each, individual user transaction, ownership stake or vote.

But a distributed consensus mechanism is only effective and faithful if the community is impartial. To be impartial, voters must be fairly separated. That is, there must be no collusion enabled by concentration or hidden collaboration. They must be separated from the buyer and seller; they must be separated from the big stakeholders; and they must be separated from each other. Without believable and measurable separation, all sorts of problems ensue. One problem that has made news in the Bitcoin word is the geographical concentration of miners and mining pools.

A distributed or decentralized transaction validation is typically achieved based on Proof-of-Work (POW) or Proof-of-Stake (POS). [explain]. But in practice, these methodologies exhibit subtle problems…

The problem is that Proof-of-Work can waste an enormous amount of energy and both techniques result in a concentration of power (either by geography or by special interest) — rather than a fair, distributed consensus.

In a quasi-formal paper, C.V. Alkan describes a fresh approach to Blockchain consensus. that he calls Distributed Objective Consensus. As you try to absorb his mechanism, you encounter concepts of Sybil attacks, minting inequality, the “nothing-at-stake” problem, punishment schemes and heartbeat transactions. Could Alkan’s distributed consensus mechanism be too complex for the public to understand or use?…

While I have a concern that time stamps and parent-child schemes may degrade user anonymity, the complexity doesn’t concern me. Alkan’s paper is a technical proposal for magic under the covers. Properly implemented, a buyer and seller (and even a miner) needn’t fully understand the science. The user interface to their wallet or financial statement would certainly be shielded from the underlying mechanics.

Put another way: You would not expect a user to understand the mechanism any more than an airline passenger understands the combustion process inside a jet engine. They only want to know:

• Does it work?  •  Is it safe?  •  Is it cost effective?  •  Will I get there on time?

So will Alkan’s Decentralized Objective Consensus solve the resource and concentration problems that creep into POW and POS? Perhaps. At first glance, his technical presentation appears promising. I will return to explore the impact on privacy and anonymity, which is my personal hot button. It is a critical component for long term success of any coin transaction system built on distributed consensus. That is, forensic access and analysis of a wallet or transaction audit trail must be impossible without the consent and participation of at least one party to a transaction.


Ellery Davies co-chairs Cryptocurrency Standards Association and The Bitcoin Event. He is columnist & board member at
Lifeboat Foundation, editor of AWildDuck and will deliver the keynote address at Digital Currency Summit in Johannesburg.

2 thoughts on “Distributed Consensus: Beyond POW or POS

  1. Thank you, Ellery, for featuring my article on your amazing blog!

    I’m glad you like the general concept. It’s a work in progress though and I’m currently looking into alternatives to the parent-child account structure, which has been challenged by some for not being economically fair. Indeed, regular users suffer from inflation and don’t benefit from the minting account market at all since the minters reap all the rewards (interests, payment for selling child accounts).

    In an alternative model (that I’m planning to release in a follow-up article), minting accounts would be created out of thin air and go to the highest bidder, while the bid sum would be burned forever. This would reduce the money supply and counteract inflation in favor of all stakeholders. I’m fascinated by the thought that a cryptocurrency could autoregulate it’s own coin supply.

    I haven’t analyzed nor optimized my concept for anonymity and privacy yet, even though I put some research into anonymous P2P networks a few years ago. That’s an interesting field that needs to be explored further. Anonymity is not only an end in itself, but also a prerequisite for fungibility of a currency.

    Another aspect that I’m currently reseaching is the economic finality of blocks/transactions and the question if hearbeat transactions could be leveraged in that respect as well.

    • Good evening, C.V.

      Wow, That was a quick reply!—just minutes after the article was posted. Kudos to whatever agent you use to scan for articles about yourself. It is clearly effective.

      I am heartened that you believe that an ability to conduct private transactions is a factor in fungibility. I certainly agree; especially in light of forces that push for a registry of tainted coins (We wrote about the Pros & Cons).

      Please keep us up to date on your research. This is a fascinating realm and one that intersects with our recent article on Blockchain scaleability. Your thought process and paper demonstrates proficiency. I believe that your work has the potential to significantly advance Blockchain dynamics. You stand to truly enhance the world.

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