Why we created Proof-of-Networking
An introduction to the Xenio consensus protocol
Consensus protocols. Every blockchain has one, and it all started off with Bitcoin’s Proof-of-Work. Just a few weeks from now, Ethereum is about to switch to Proof-of-Stake. And then there’s the slightly different approach of Delegated Proof-of-Stake, plus Proof-of-Authority, Proof-of-Activity, Proof-of-Burn, and the esoteric Proof-of-Capacity, and others, rounded up with a weirdly intriguing concept of Proof-of-Elapsed-Time — brought to you by Intel (patent pending, I’m sure.)
So, why do consensus protocols differ from each other, and why would anyone think we need another consensus protocol anyway? We can’t even agree on the ones we already have, and the ones they’re starting to come up with are beginning to look like they’re trying to solve a problem that nobody really experiences in any meaningful way anyhow.
Well, to understand the reason behind the proliferation of different consensus protocols, it helps to take a small step back and restate the question. So: What’s a consensus protocol for? In basic terms, the purpose of a consensus protocol is to provide a quick and easily verifiable way for proving what is “true” on the blockchain. It does this through a mechanism that prevents abuse of the network (introduction of “false” data) by balancing the needs of the network users with those of the network providers. The definition of those needs is largely what differs in each of the proposed solutions. In other words, the “why” of each consensus protocol is very similar to the other protocols, but the “how” is what makes the protocols so wildly different from each other.
Proof-of-Work seeks to ensure that miners are rewarded for maintaining the network. The collective need of the users to have a functioning network is balanced by the nontrivial aspect of performing the “work” to keep the network running. But as we have seen with the recent attempts at hard forks by contentious factions within the Bitcoin community, the relationship between the miners who perform the work and the users who use the network is largely adversarial. Still balanced, mind you — but adversarial. In Bitcoin, this is by design, but it introduces the question: can another consensus protocol be created where network participants are not fundamentally adversaries?
Proof-of-Stake was invented to solve a different problem (the “PoW mining is wasteful of global resources” problem), but as an added effect, it does also attempt to ensure that miners are rewarded for making cooperative decisions that benefit the rest of the network — any attempt to hijack the network requires the stakeholder to own 51% of the network value, and if the attack is successful, the underlying value of the network will fall as affected users abandon the network for a different system. An attacker could only expect to lose money from a successful attack. But someone with a lot of money who doesn’t care if they lose it could still affect an attack on the network if they really wanted to. Not a perfect solution, but at least the majority of network users are theoretically on the same side.
The various other protocols try to emphasize the benefit of low electricity use, or guaranteed low inflation (or negative inflation), or any number of other unintended issues that the other protocols introduce in practical application. Since the problem of verifying the “truth” of blockchain data is already largely solved through existing mechanisms, the different approaches tend to work mostly on improving specific efficiencies of the network.
So, in contemplating which consensus protocol to use on the Xenio blockchain, and despite the minor efficiency gains proposed by the other consensus protocols, we were still left with the question: Can we build a blockchain network where the nodes are cooperatively aligned instead of adversarially aligned?
The answer lies in the description of a network itself. In any network, some server nodes provide services that other user nodes need, and in return, the server nodes are provided with some measure of value for those services. Note that the end user is not necessarily directly providing that value to the server; it may come through intermediaries or third parties in the form of advertisement revenue, but eventually the consumer transfers value for the service through indirect payment (perhaps through tokens) or through their own time (as in the case of advertising.) This disconnection between the end user and transfer of value to the server is inefficient from a traditionally transactional point of view, but provides immense flexibility in the way services are presented and consumed. Abstract the concept even further, and you end up with the idea that users can consume services while the network itself provides the value to the service provider, even without immediate payment from the consumer. Networks can generate rewards for simply providing network services, which in turn increases the value of the network in a positive feedback loop.
Thusly, the idea for Proof-of-Networking (PoN) was born. When server nodes can prove that they are providing services on the network, the network rewards them based on their usefulness. To make the actual practical process easier to understand, we can describe this generally through a hybrid Proof-of-Authority and Delegated Proof-of-Stake model. Servers stake blockchain coins and provide network services, and the block reward is calculated based on the number of coins staked and the number of consumer nodes attached to the service. Authoritative nodes sign off on the stake and the valid connection of consumer nodes, and the reward is processed through the issuance of newly minted coins.
PoN is a consensus model that ensures server nodes provide the services that consumer nodes need, while rewarding the server nodes directly. The result is that the needs of the network service providers and the network users are aligned very strongly in a non-adversarial, cooperative manner. Truth of the data on the blockchain can be validated cheaply, efficiently, and quickly. And it can apply to any number of different types of network services.
Xenio is, of course, a gaming platform. The Xenio blockchain is dedicated to gaming, but the greater PoN concept is much larger than that. We see distributed web services, high availability library and database services, and even trustless peer-to-peer lending services as possible applications for PoN. When the network facilitates cooperation among all nodes, the network grows stronger. And its value becomes much more than the sum of its nodes.