Post-truth in Proof of Capacity

Aug 26 · 8 min read
Post-truth has become an effective tool to manipulate public opinion

As an observer of the Proof Of Capacity landscape for quite some time, I must say I find this trust-minimizing strategy using hard disk drives quite interesting as a technology.

By using a fundamental principle of computing , therefore making the process of creating blocks much more energy-efficient than in Proof Of Work, it enables the creation of a highly-scalable distributed database that can serve as a means to exchange value, store wealth, secure property and agreements, and also act as a unit of account. Proof Of Capacity incentives rely on capital expenditure in HDDs and time to plot them. This is the main trade-off behind PoC in relation to PoW, where costs are mostly operational. The primary resource used, disk capacity, is abundant and already owned by participants. Due to the highly decentralized nature of the system, the cost to attack the network by material war is an insurmountable task.

Now, what keeps me intrigued is how such elegant and efficient networks built upon such consensus so far failed to spark mainstream interest or build a significant network effect.

Even well-known cryptocurrency enthusiasts and so-called hackers seem oblivious and mislead about such technology. What is going on, then? Bad luck, social attacks, inherent problems in the consensus or perhaps something in-between?

One thing is for certain — history reveals a lot. And post-truth, the concept by which objective facts are swept under the carpet and substituted by personal beliefs and emotions, certainly is what — so far — kept Proof Of Capacity networks grounded.

“If you repeat a lie often enough, people believe it, and you will even come to believe it yourself”.

The big irony in this phrase is that it is often attributed to Joseph Goebbels in the Publications Relating to Various Aspects of Communism (1946), by the United States Congress. However, no source has ever been located. The phrase is consistently seen attributed to him, and so, by repetition, it’s believed to be his. Many such cases can be found in the history of Proof of Capacity networks.

Burst was the first ever cryptocurrency to implement working, Turing complete smart contracts in a live environment in the form of Automated Transactions (AT) back in 2014, even though media channels prefer to laud Ethereum instead. It was launched in a fairly manner by an anonymous developer, who disappeared after one year, leaving the protocol at the hands of “the community”.

Oh, “the community”.

What happened to Burst was a shame. The protocol was co-opted by a group of scammers, criminals and spammers that destroyed the reputation of individuals, stole a lot of money and turned people off in general. These guys took advantage of the relatively unfair and aggressive exponential decay in the reward distribution schedule — an inheritance of its NXT roots — and ended up minting millions of burstcoins while network size was still in its infancy. By the time this despicable group left and a highly-experienced and self-funded group of developers took the reins in making Burst a respectable cryptocurrency at last, which was not earlier than August 2017, nearly 85% of all burstcoins had already been mined and were in circulation, in the hands of people who most certainly wanted to get rid of it at the right moment. Certainly not an easy task or an inviting risk/reward ratio to pick up a cryptocurrency in such dangerously centralized state, spend money in infrastructure and develop software for free. But pearls have been thrown at swine anyway.

In hindsight, it’s obvious that even though the PoC Consortium laid out a powerful scalability plan to the Burst blockchain, it was not enough to contain the enormous sell pressure from early whales — mostly miners and scammers — still holding much part of the network currency, and the bear market cycle that started shortly after January 2018 and persisted through the period the PoCC decided to lead Burst wallet development. The Burst network value dropped against the more liquid Bitcoin, Ethereum and US Dollar markets, and to this day it continues to do so.

Of course, be it the PoCC or the Burst Apps Team — the current group leading core wallet development — one cannot assume causality just because there is correlation, as this is nothing more than a classic case of spurious correlation. Do Nicolas Cage movies cause people to drown? Is Denmark to blame or punish for the shutdown of thermohaline circulation, just because Greenland is under their management? Certainly a fallacious take. Developers cannot control such externalities.

But the ravaging bear market wasn’t enough to cause distrust and turbulence in the PoC world. The ambitious plan for Burst didn’t pay off for anyone and perhaps the developers would be much better off have they created an entirely new network from scratch, instead of ending up wasting time and even being target of slander by miners and pool operators — which comprise the great majority of a community with such small network effect. And that can be a problem for any group developing a coin. December 2018 was the tipping point where that was made clear.

Burst network difficulty rose roughly 1600% or 17 times after the PoCC took the lead developer role and attracted fresh blood around the protocol. Sadly, Burst only managed to attract more and more miners instead of actual businesses and economic activity. The struggle is understandable, given how the coin’s reputation was tarnished and persisted long after the scammers left the scene. With block rewards shrinking fast and a relentless bear market mauling Burst market capitalization, suddenly nobody was profiting from mining anymore, not even large scale operators. So suddenly a very large Burst mining group from somewhere in China decided to code-fork Bitcoin and shoehorn the PoC2 consensus used by Burst in it mixed with a staking system which was a first in the PoC domain. A “copypasta” coin with no real intent of creating an economy behind it other than mining/speculation, riddled with bugs, inherent centralization issues and a fixed inflow of coins mined going straight to some shady “Foundation” wallet — an abomination called Bitcoin HD. The icing on the cake is of course the closed-source nature of the wallet, and the fact that mining requires you to give your passphrase to a pool. Never mind the irony of having to trust entities in a supposed trust-minimizing system.

The Bitcoin HD scheme

And there’s the thing, in PoC you can mine several coins using the same plot format, at the same time, in a process called collision-free mining. Bitcoin HD developers made this backdoor possible with their stupidity. Imagine back in 2011 if Litecoin was launched using SHA256 as the hashing algorithm… well, to be fair, not even this analogy would be as bad. Because what BHD did was create a sort of nothing-at-stake situation for the Burst miners, who suddenly could mine another chain without impacting their bottom line. And in such situations, some people can’t be helped, and greed devours the brain. Things got awkward. Miners and pool operators within the Burst community started being teeth and claws hostile to the developers’ actions to protect Burst as the apex PoC cryptocurrency in the space, because it was interfering with their BHD profits. All kinds of slander ensured — BHD was being “attacked” and developers where stealing from miners. Some miners, ironically the ones most profiting from the BHD scam, were smearing the developers by telling miners to leave their pools. At that point, there was nothing else to do but to step down and move on.

The problem is that such tragic chain of events made it evident that launching your own half-assed PoC copypasta cryptocurrency is a very attractive way to make easy money, with the added bonus that miners will always be sure to minimize the moral and ethical problems of participating in your scheme for you. Genius! To this day, more and more Burst clones exist “just because”. Some have been deemed a complete scam, but that doesn’t stop them from reappearing, and always from the same place. It seems like people found a way to hack their way to richness at the expense of everyone else. Inequality at the click of a mouse! Try for yourself!

So how can Proof of Capacity thrive and work in favor of mankind, when mankind fails to see the big picture? What to do when lots of competing scams disguised as financial security are in vogue, and a big portion of participants even believe they are not a net negative to the space? How can people benefit from a network based on PoC and how can a PoC network act as a monetary tool and “bank the unbanked”, when incentives are more skewed towards taking advantage of multi-chain mining through issuance of new networks and not actually unify, socially scale and build on top of one protocol? To this day, of all PoC blockchains, only Burst keeps attracting talent and is concerned in creating a real economy powered by its native currency. But its community is under constant social tension between its participants, given how even some community managers — which happen to be miners — openly promote coins like Boom and BHD.

The PoCC has announced it is working in an entirely new PoC blockchain. They are determined to take rather bold decisions by architecting everything from scratch, even the community. Many things are still under heavy discussion and open for review. The goal is to present something entirely new and be both trust and inequality-minimized, on top of implementing everything that was originally planned for Burst but didn’t come to fruition — novel plot formats such as PoC3, the Dymaxion layer, etc. The BHD idea of adding skin-in-the-game to miners through a staking mechanism will also be explored. Credit where credit is due, the only good thing BHD did was poorly implement a good idea, giving the PoCC room to improve and implement it properly.

Meanwhile, this errant vagabond will keep strolling the Proof of Capacity space with keen interest, hoping that in the next few years it will finally flourish and do a good job at distributing wealth to mankind.

The PoC Flâneur

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Insights on all things Proof Of Capacity.

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