New trends in cryptocurrencies: 100% proof-of-stake and Nxt
What are we all about bitcoins, but about bitcoins? New developments in the field of cryptocurrencies do not stand still. On Habré, the concept of Proof of Stake, which is designed to make up for the shortcomings of the traditional Proof of Work, has not yet been covered in detail. But she is already more than two years old.
In this article I want to tell you about:
For Bitcoin mining, the Proof of Work concept is used , in which the network security is guaranteed by the computing power of the participants. The probability of generating another block from an individual miner is directly proportional to its processing power. You can attack 51% on the network if you take control of the computing power, which is 51% of the total power of all miners in the network. This, for example, happened with FeatherCoin (fork of Bitcoin). A 51% attack does not destroy the network, but undermines its credibility: it allows the attacker to use the same means twice at the time he generates the “wrong” block.
An alternative approach - Proof of Stake - was proposedback in July 2011. Here, the miner is more likely to generate a new block in a common circuit, the more currency he has on his wallet. This approach is used, for example, in forks: PeerCoin, NovaCoin, YaCoin. It is used in combination with the main one - Proof of Work - to increase the network's resistance to attack by 51%.
Until recently, there was no cryptocurrency with the implementation of pure Proof-of-Stake. The first such currency was Nxt (pronounced "next"). It was written by the author from scratch, in contrast to countless Bitcoin forks. First announced in September 2013.
Features of Nxt :
What are the benefits of a pure PoS system? First of all, it is high energy efficiency. If in the case of Bitcoin, miners burn gigawatts of energy in the process of selecting hashes, then in the case of Nxt, we can mine at all on any device with a small load. Here, resources are spent only on servicing the transactions themselves. Practice shows that such a system is quite capable of not losing integrity, and even, perhaps, is more resistant to attacks.
Low energy costs for network operation provide cheap transactions in the long run. If we consider Bitcoin, then the currency emission decreases over time, and the commission for transfers becomes the main reward for miners. Since the profitability of Bitcoin mining is already constantly falling, by this moment the cost of equipment and electricity for one generated block will be a significant amount of money. This means that for payback, miners will have to take only transactions with a correspondingly large commission. Thus, most likely, the working commissions in the Bitcoin network will grow significantly over the years. As for Nxt, the minimum cost of transfers will always remain at the cost of transaction processing, which is generally close to zero. For example, now the minimum transfer fee is 1 NXT,
What about network security on pure PoS? An attack of 51% becomes possible if the miner takes possession of most of the coins. At first glance this may seem ridiculous, but think about it: almost always to buy 51% of all coins is much more expensive than to buy iron at 51% of the network capacity. And in the case of a successful attack and undermining confidence in the network, the exchange rate drops significantly, and the attacker stays with a huge number of coins, now worthless. As a result, the cost of an attack is much higher, and the meaning in it is much less. As with the increase in the power of the PoW network, the likelihood that someone will be able to carry out such an attack decreases, so with the distribution of coins among many users of the PoS network, the likelihood that someone will be able to take possession of half of all the coins will decrease.
Brainwallet is such a way to store a wallet, in which you do not depend on files in principle. All the necessary information for full access is stored in your head. This is not a new concept, but one that has its own right to life. It works as follows. You come up with a very long password, create your wallet, and now using this password you can enter this wallet from absolutely any client on the network. The password you select is uniquely converted into a private key, with which you get access to the wallet. Thus, you do not need to store absolutely anything on any medium - all your money is safely stored in the cryptocurrency network, and the password for accessing it is only in your head. Only the password needs to be invented really long. Do not use phrases that have ever been published anywhere. It is recommended that you pick up a long phrase that you can easily remember, and change it in an unexpected and silly way. For example, add extra letters, punctuation, some other information. The main thing is to make sure that you don’t forget what you thought up. :)
The Nxt Network Client is a Java-based application with web-based access. The easiest way to launch an Nxt wallet is to use a public client. For example: https://nxtwallet.com:7875/ or https://162.243.232.67:7875/
The network client is running on the server and you can use it to enter your wallet. To do this, click on the lock symbol in the upper left corner and enter your very long password. This access to the wallet. If this is your first time doing this, then the wallet is automatically created. Whatever client you use, whether public or locally running, it will be the same wallet if you enter the same password.
At the same time, if you use a public server, then the security of your wallet is limited by your trust in this public server. I do not recommend storing large stocks of funds in those wallets that you have accessed from the public server at least once. For this purpose, it is better to launch the network client locally and create a wallet there, after making sure that there are no trojans on your computer.
Detailed Russian instructions for starting a wallet on a local machine are here: bitcointalk.org/index.php?topic=345882.0
The public opening of the currency will occur in early January 2014, when the author opens the source. In advance, he does not open them just so that the currency is not forked ahead of time. In this it is easy to understand.
In a sense, this can be considered a new generation of cryptocurrencies, since we have received a fundamentally new level - now the cryptocurrency network works successfully and safely, without heating the air in vain. This advantage is both environmental and economic. Will this survive a new generation or find a fundamental gap in itself? We have to find out.
In the future, the author intends to launch a decentralized exchange based on the Nxt network and a number of other services. It can be just as revolutionary and interesting as the cryptocurrencies themselves in general.
The Nxt network block explorer is here: 87.230.14.1/nxt/nxt.cgi?action=10
Official bitcointalk branches: bitcointalk.org/index.php?topic=303898.0 and bitcointalk.org/index.php?topic=345619.0
So far the only NXT / BTC exchange: dgex.com
By the way, over the past week or two, its exchange rate on this exchange has grown by about 10 times.
UPD:
Everyone has a question about the distribution of the originally generated billion coins. I forgot to cover this issue. Here in this topicat the very first cryptocurrency announcement, it was announced that all coins would be publicly distributed to those who supported the development of the system. The maximum transfer size was limited to 1 BTC (which is only ~ $ 150 at that time), the amount received by the NXT depositor is proportional to the share of the deposit of the total amount. In total, ~ 21 BTC was collected from ~ 70 people, anyone could participate in this. After that, the entire billion from the first block went to these 70 participants. By the way, I am not among them: I learned about Nxt just a week ago.
I believe that this approach is much more difficult to blame for thirst for profit than, for example, the same Ripple or Quark, in which more than 90% of the coins continue to be held by the creators. 21 BTC is not such a big fee for a real innovation and the work being done by the author, in my opinion.
UPD2:
I came across a video with a good presentation of Nxt:
In this article I want to tell you about:
- Proof of Stake (PoS) concept and 51% attack protection
- 100% PoS and mining from any device that does not depend on computing power
- Nxt cryptocurrency written from scratch and implementing this concept
- not a chip, but not mentioned on Habré before - brainwallet
- prospects for a new approach
Introduction
For Bitcoin mining, the Proof of Work concept is used , in which the network security is guaranteed by the computing power of the participants. The probability of generating another block from an individual miner is directly proportional to its processing power. You can attack 51% on the network if you take control of the computing power, which is 51% of the total power of all miners in the network. This, for example, happened with FeatherCoin (fork of Bitcoin). A 51% attack does not destroy the network, but undermines its credibility: it allows the attacker to use the same means twice at the time he generates the “wrong” block.
An alternative approach - Proof of Stake - was proposedback in July 2011. Here, the miner is more likely to generate a new block in a common circuit, the more currency he has on his wallet. This approach is used, for example, in forks: PeerCoin, NovaCoin, YaCoin. It is used in combination with the main one - Proof of Work - to increase the network's resistance to attack by 51%.
Nxt: 100% Proof of Stake
Until recently, there was no cryptocurrency with the implementation of pure Proof-of-Stake. The first such currency was Nxt (pronounced "next"). It was written by the author from scratch, in contrast to countless Bitcoin forks. First announced in September 2013.
Features of Nxt :
- the client is written from scratch in Java
- pure proof of stake
- total amount of coins - 1 billion
- block is generated once a minute
- all coins are created in the very first block, there is no issue
- miners earn on commissions
Benefits
What are the benefits of a pure PoS system? First of all, it is high energy efficiency. If in the case of Bitcoin, miners burn gigawatts of energy in the process of selecting hashes, then in the case of Nxt, we can mine at all on any device with a small load. Here, resources are spent only on servicing the transactions themselves. Practice shows that such a system is quite capable of not losing integrity, and even, perhaps, is more resistant to attacks.
Low energy costs for network operation provide cheap transactions in the long run. If we consider Bitcoin, then the currency emission decreases over time, and the commission for transfers becomes the main reward for miners. Since the profitability of Bitcoin mining is already constantly falling, by this moment the cost of equipment and electricity for one generated block will be a significant amount of money. This means that for payback, miners will have to take only transactions with a correspondingly large commission. Thus, most likely, the working commissions in the Bitcoin network will grow significantly over the years. As for Nxt, the minimum cost of transfers will always remain at the cost of transaction processing, which is generally close to zero. For example, now the minimum transfer fee is 1 NXT,
Durability
What about network security on pure PoS? An attack of 51% becomes possible if the miner takes possession of most of the coins. At first glance this may seem ridiculous, but think about it: almost always to buy 51% of all coins is much more expensive than to buy iron at 51% of the network capacity. And in the case of a successful attack and undermining confidence in the network, the exchange rate drops significantly, and the attacker stays with a huge number of coins, now worthless. As a result, the cost of an attack is much higher, and the meaning in it is much less. As with the increase in the power of the PoW network, the likelihood that someone will be able to carry out such an attack decreases, so with the distribution of coins among many users of the PoS network, the likelihood that someone will be able to take possession of half of all the coins will decrease.
Brainwallet
Brainwallet is such a way to store a wallet, in which you do not depend on files in principle. All the necessary information for full access is stored in your head. This is not a new concept, but one that has its own right to life. It works as follows. You come up with a very long password, create your wallet, and now using this password you can enter this wallet from absolutely any client on the network. The password you select is uniquely converted into a private key, with which you get access to the wallet. Thus, you do not need to store absolutely anything on any medium - all your money is safely stored in the cryptocurrency network, and the password for accessing it is only in your head. Only the password needs to be invented really long. Do not use phrases that have ever been published anywhere. It is recommended that you pick up a long phrase that you can easily remember, and change it in an unexpected and silly way. For example, add extra letters, punctuation, some other information. The main thing is to make sure that you don’t forget what you thought up. :)
How to try
The Nxt Network Client is a Java-based application with web-based access. The easiest way to launch an Nxt wallet is to use a public client. For example: https://nxtwallet.com:7875/ or https://162.243.232.67:7875/
The network client is running on the server and you can use it to enter your wallet. To do this, click on the lock symbol in the upper left corner and enter your very long password. This access to the wallet. If this is your first time doing this, then the wallet is automatically created. Whatever client you use, whether public or locally running, it will be the same wallet if you enter the same password.
At the same time, if you use a public server, then the security of your wallet is limited by your trust in this public server. I do not recommend storing large stocks of funds in those wallets that you have accessed from the public server at least once. For this purpose, it is better to launch the network client locally and create a wallet there, after making sure that there are no trojans on your computer.
Detailed Russian instructions for starting a wallet on a local machine are here: bitcointalk.org/index.php?topic=345882.0
Source code
The public opening of the currency will occur in early January 2014, when the author opens the source. In advance, he does not open them just so that the currency is not forked ahead of time. In this it is easy to understand.
Prospects
In a sense, this can be considered a new generation of cryptocurrencies, since we have received a fundamentally new level - now the cryptocurrency network works successfully and safely, without heating the air in vain. This advantage is both environmental and economic. Will this survive a new generation or find a fundamental gap in itself? We have to find out.
In the future, the author intends to launch a decentralized exchange based on the Nxt network and a number of other services. It can be just as revolutionary and interesting as the cryptocurrencies themselves in general.
useful links
The Nxt network block explorer is here: 87.230.14.1/nxt/nxt.cgi?action=10
Official bitcointalk branches: bitcointalk.org/index.php?topic=303898.0 and bitcointalk.org/index.php?topic=345619.0
So far the only NXT / BTC exchange: dgex.com
By the way, over the past week or two, its exchange rate on this exchange has grown by about 10 times.
UPD:
Everyone has a question about the distribution of the originally generated billion coins. I forgot to cover this issue. Here in this topicat the very first cryptocurrency announcement, it was announced that all coins would be publicly distributed to those who supported the development of the system. The maximum transfer size was limited to 1 BTC (which is only ~ $ 150 at that time), the amount received by the NXT depositor is proportional to the share of the deposit of the total amount. In total, ~ 21 BTC was collected from ~ 70 people, anyone could participate in this. After that, the entire billion from the first block went to these 70 participants. By the way, I am not among them: I learned about Nxt just a week ago.
I believe that this approach is much more difficult to blame for thirst for profit than, for example, the same Ripple or Quark, in which more than 90% of the coins continue to be held by the creators. 21 BTC is not such a big fee for a real innovation and the work being done by the author, in my opinion.
UPD2:
I came across a video with a good presentation of Nxt: