Our recent work titled Tuning PoW with Hybrid Expenditure will be in the proceedings of Tokenomics’21.
Long story short, we propose a new blockchain protocol called Hybrid Exepnditure Blockchain (HEB) that offers similar security guarantees as Bitcoin, but wastes only half of the electricity. Pretty neat!
The trick is as follows – PoW blockchains are secure because creating blocks is costly; in Bitcoin these costs are directly translated to electricity. In HEB however, a portion of these costs is internal, i.e., miners spend the native token to create blocks. The internally-spent tokens are recirculated back to the system, so the internal spending does not deflate the currency (which, in turn, increases the external costs). HEB parameters can be set such that the resultant miners’ equilibrium is to spend half of their mining expenses internally, saving 50% compared to a pure-PoW, Bitcoin-like blockchain.
Q: Why not simply use proof-of-stake (PoS)?
A: PoS is a promising direction, but in its current form it has a few downsides. First, PoS systems are permissioned: New-comers need to acquire tokens for participation; that requires a transaction being confirmed by the current stakeholders; it is unclear what are the incentives of the current stakeholders to authorize such a transaction. Moreover, to combat the infamous long-range attacks and nothing at stake issues, PoS systems often requires users voluntarily deleting their private data, or alternatively, users being available for extended periods of time. HEB is like Bitcoin in that sense – standard non-majority PoW assumptions.
Q: Isn’t HEB in fact proof-of-burn?
A: Not at all. Proof-of-burn is like an ostrich with its head in the sand – the electricity is wasted somewhere else, there’s no real saving here. In HEB, the internally-spent tokens are not burnt, just recirculated back
- Tuning PoW with Hybrid Expenditure
Itay Tsabary, Alexander Spiegelman, and Ittay Eyal
(to appear in) Tokenomics 2021