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The Neblio Network

2018-12-10 | Neblio

While many of the prospective applications will take place on private chains within enterprises, Neblio also offers a public chain for such applications. Within such a chain, it is paramount to secure the network against attacks from bad actors. Bitcoin uses a proof-of-work algorithm for this purpose. Miners achieve consensus by expending computer power. Miners use their computing power to find (mine) new blocks and are rewarded for doing so when sucessful. As long as the majority of the network’s computing power agrees, consensus is maintained and the integrity of the network is secure. Introducing false transactions to the network is not feasible, as it would require reaching a majority of the computing power on the network. Such an attack would be cost-prohibitive, as the hardware required to achieve a majority stake in the computing power on the network would be extremely expensive.

However, there are severe downsides to a proof-of-work algorithm. First, the network ends up consuming so much energy that it becomes costly not only in financial terms but also to our environment. In July of 2018, the total energy expended by the Bitcoin network was estimated at around 22 TWh per year, which is almost the same as the entirety of Ireland. One can definitely question whether the security of a blockchain is worth expending so much energy. It most certainly provides good reasons to search for an alternative approach.

Another downside of proof-of-work algorithms is the fact that mining ends up being cost-prohibitive to small stakeholders in the network. Bitcoin mining has ended in an arms race between miners to secure the most computing power. The result is that mining has centralised with large operations in areas with low electricity costs. Due to the specialised hardware required, securing the network has become financially uninteresting to anyone except the largest players in the space. Because of this, contrary to its philosophical background of decentralisation, the security of the Bitcoin network rests with a relatively small group of people.

Proof of Stake

Because proof-of-work algorithms end up being inefficient and centralising, Neblio and many other newer blockchain networks opt for a proof-of-stake model for consensus. In proof-of-stake networks, consensus is achieved by network users who use their tokens on the platform as votes. These votes are used to verify new blocks and secure the network. Users with more tokens get more votes on the network and as such have a larger say in verifying or refusing transactions or other mutations of the blockchain. To incentivise users to stake their tokens and take the effort to secure the chain, users are given rewards for staking their tokens and verifying new blocks. In this model, rather than requiring the majority of computing power, an attacker would need to achieve such a large number of coins that this too would be infeasible and cost-prohibitive. Ownership of coins on a blockchain cannot be forged. As such, the only means of attack in a proof-of-stake system would be to buy such a large number of coins that one would end up with the majority vote on the platform. Buying these coins would be so costly, especially since the act of buying such quantities would put tremendous upward pressure on the price, that such an attack would not be financially interesting or feasible to perform.