Conflux Network
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Conflux Network

Bringing Stability to the Mining World

Why mining on Conflux Network is more efficient, decentralized, and secure.

Proof of Work (PoW) is the most common consensus mechanism that has been implemented in popular networks such as Bitcoin and Ethereum, and Conflux Network is no exception. Conflux Network uses PoW consensus because of its proven reliability in mature networks. However, specific mechanisms are incorporated to keep mining fair for all parties involved — no matter how big or small.

Making Mining More Efficient

Currently, the world’s two largest blockchain networks — Bitcoin and Ethereum — operate PoW consensus for their respective networks and the environmental impact is enormous. Bitcoin requires 58.81 TWh annually while Ethereum requires 7.89 TWh — the annual power consumption of Israel and Kenya, respectively. There have been many attempts to offset the impact of power consumption through renewable energy with miners always chasing the next cheapest electricity source, better environmental conditions, and more efficient machines. And yet, none of those solutions touch the root of the problem: most of the hashing power is wasted. Only one block is included in the chain, and the remaining orphan and uncle blocks are discarded along with the energy used to form them. Conflux Network’s approach is simple: all mined blocks are used to secure the network — no discarded blocks means less wasted energy. Reducing operating costs is crucial for long term miner sustainability, and network security.

Each block is used in securing the network, and therefore each block is used and less energy is wasted.

Solving the ASICs Arms Race

One of the biggest challenges facing the development of the Web3 world is the gradual centralization of control to more powerful players in the space. An area where this is evident is in mining. Currently, on Ethereum and Bitcoin it is virtually impossible to win a block without having custom mining hardware (ASICs) and joining a mining pool. Even then, approximately 50% of mining is dominated by two pools on Ethereum, and three on Bitcoin.

Ethereum mining is dominated by only a handful of players — far from the decentralized vision of Web3. source

The struggle against ASICs has been present for a time — two years ago EIP-1057 was published for Ethereum detailing Programmatic PoW (ProgPoW). While there has been much debate over it, the overall goal is to reduce the advantage of ASICs by changing PoW the implementation algorithms to better match the capabilities of commercially available GPUs. It includes hashing, memory, and randomness changes and is expected to reduce the efficiency advantage of ASICs to only 1.1–1.2x from the 2x advantage of today.

At Conflux Network, we believe that it is impossible to be 100% ASIC-resistant, and in order to combat such cases, we have implemented mechanisms such as memory-hard PoW. However, Conflux Network has mechanisms that target the root of why ASICs and mining pools exist — because winning blocks is hard. And as the only source of income for miners, it naturally drives an arms race of hashing power in hardware and pooling resources. On Conflux Network, two blocks are generated every second compared to one approximately 10 minutes for Bitcoin, and 13 seconds for Ethereum. In other words, 1200 chances to win versus 1 for Bitcoin, and 26 to 1 for Ethereum. With many more opportunities to win blocks, there is less incentive to pool resources together — and solo mining has an opportunity to thrive; thus, changing the mining landscape to a more decentralized version. Additionally, miners can earn rewards from storage interest as well as transaction fees and block rewards.

Preventing Mining Pool Attacks

Mining pool attacks are very difficult to detect, and are rarely publicized because it may only be founded on speculation. However, it is very simple — which makes it more infuriating for mining pools. The basic idea in a mining pool is that a miner is assigned a pool difficulty that is easier than the block difficulty, and if the miner finds a solution that is better than the pool difficulty it reports it to the mining pool which checks it against the block difficulty. If it is better than the block difficulty, the mining pool wins! Then the block reward is distributed based on how many solutions the miner reported that met the pool difficulty.

Attacking miners in a pool will never provide solutions that achieve the block difficulty. However, they will provide solutions to the pool difficulty in order to participate and gain part of the reward distribution.

In an attacking scenario, the miner still reports solutions that beat the pool difficulty, but does not report any solutions that beat the block difficulty (which is public knowledge). In this way, they are seen as contributing to the pool mining capacity, but they never contribute to winning blocks. Consequently, the attacking miner will always get a share of the profit but never contribute. However, this situation could also happen with a very unlucky miner who reports all solutions that beat the pool difficulty but simply never finds a solution that beats the block difficulty.

Whenever more hashing power is introduced to a pool, there are two choices: add it to your own pool, or use it to attack other pools — and many choose the latter. But why is attacking so enticing? Wouldn’t it make more sense to use the additional hashing power and add it to your own pool instead of undermining a competitor? In some cases, yes that is true — but in the majority of cases it is not. The following mathematical model illustrates when it is better to use hashing power to attack versus adding it to a mining pool.

On the left is the scenario when adding the hashing power to a miners own pool and the right illustrates the attacking scenario where it takes a slice of a competitor’s reward. The rewards are calculated by the ratio of the mining pool hash power and the total hash power. The formula is not added to the total hash power of the network in the attacking scenario because it does not change the chances of winning for either pool.

With some simplification, this formula illustrates that when this condition is true it is better to use new hashing power to attack another pool. In simpler terms, as long as the competitor is large enough, and the amount of new hashing power is not a very large gain for the pool, then it is better to attack.

Large pools can easily make the left-hand side of the equation very small because their hashing power (denominator) is so large. This makes it simple to choose a smaller but sizable competitor that creates a larger fraction on the right side, attack them, and drive them out of the business. Because of that, a vicious cycle has formed where hashing power is becoming more and more centralized. With greater levels of centralized mining, networks diverge from the vision of a decentralized future, but more importantly, security can be compromised to 51% attacks and immutability is no-longer guaranteed.

Stopping mining pool attacks are vital to ensuring the longevity and stability of Conflux Network; so we have developed a solution that breaks the attack cycle. The main mechanism that allows attacks to occur is the knowledge of the block difficulty. At Conflux Network, we are implementing a solution by introducing an extra nonce that can be used by mining pools as a secret. The main proof of work equation is:

This allows the server to provide the hash of the second nonce and pool difficulty to the miner, and even though the miner can know the block difficulty, they will not know if they have a correct solution because of the second nonce. Thus completely eliminating the mechanism that allows mining pools to attack. And in the case of an individual miner, they could simply choose any nonce as their “secret”.

Using a second nonce that the mining pool server can keep a secret, the mining pool can protect itself from being attacked by miners who used to discard block solutions.

At Conflux Network, we have built a system where mining can happen individually or in pools and where blocks can be won more efficiently, fairly, and frequently. Additionally, we are introducing mechanisms that protect smaller mining operations from being attacked by larger ones. Thus protecting the decentralization of mining on Conflux Network and the security of our network. While there has been much discussion on how Conflux Network is a safe and reliable system for developers and users, it is just as important that stability also extends to the miners who secure the network. By providing stability to miners, we can provide a reliable network for developers to build and interact with an ecosystem of Web3 protocols.

Written by Conflux Network’s Research Engineer Aaron Lu

To discuss Conflux Network and join our community, visit our official channels:

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Conflux Network

Conflux Network

Conflux is a PoW + PoS hybrid first layer consensus blockchain for dApps that require speed at scale, without sacrificing decentralization.