Cryptographer Silvio Micali Speaks on Bitcoin, Ethereum and Proof of Stake
Silvio Micali is an MIT professor and Turing Award–winning cryptographer known for his work in technology that form the bedrock of blockchains now: public-key cryptosystems, digital signatures, pseudorandomness and multiparty computations. He is also the co-inventor of the zero-knowledge proof.
From the ’90s, he worked on Byzantine agreement, a protocol for accessing nodes in a distributed system to agree on a condition shift. And in 2012, long-time and he collaborator Shafi Goldwasser were co-recipients of this A.M. Turing Award, basically, the “Nobel Prize in calculating.”
Upon learning about Bitcoin three years ago, Micali switched his attention from mechanism design, which had swallowed him for the past seven decades, and dove headlong into developing a proof-of-stake algorithm. His job is named Algorand.
Put simply, Algorand relies on a novel kind of Byzantine agreement with only nine expected measures. In each measure, committee members, chosen at random at a private lottery, are replaced. The outcome is a high-security system using a negligible risk of forks.
Based on Micali, recent tests show Algorand can process 2 MB cubes in 17 seconds, in contrast to Bitcoin, which produces a 1 MB block each 10 minutes. (A paper on these results will be presented at SOSP, the biennial ACM Symposium on Operating Systems Principles, after this month.)
In an interview with Bitcoin Magazine, Micali clarified why he thinks proof of stake is superior to evidence of work, the consensus algorithm which underlies most cryptocurrencies now, such as Bitcoin and Ethereum. Even though Ethereum, more often regarded as a smart contract platform, aims to transition to evidence of stake next year.
“The first time I learned about Bitcoin, I watched all of the difficulties. For me, the main difficulty is that the waste of computational tools. That is really appalling,” he explained. “It drives up costs and depletes the entire world of funds.”
Second, he sees miners as “a new center of power” and an orthogonal force into the real users of the system: the coin holders.
“If five mining pools can control what goes in or doesn’t go into a block, in what sense is your ledger decentralized? You don’t want miners having control within the ledger, especially when they have reduced margins, are far away and answerable to nobody. I think it’s a recipe for disaster,” he said.
Ultimately, trade ambiguity does not sit well with him. In Bitcoin, occasionally two blocks are observed at roughly the same time, creating a temporary fork in the chain. When that happens, the branch together with the greater hash electricity has been elongated, while the other and its blocks “disappear.” If your trades happened to be in an orphaned block, it will gradually get picked up again at the primary chain, however for Micali, the notion is unsettling.
“Each time that I see my transaction is in a block, so I fear the block may disappear. But not mind anxious people like me; banks may not be willing to have the additional danger,” he said. “Can you imagine a monetary world where wire transfers could be removed?”
Micali believes proof of stake is a better choice. In proof of bet, there are no miners, just the coin holders. Further, a coin holder’s ability to create or validate that a block is dependent on the number of coins in the machine he or she possesses.
“Your influence in maintaining the integrity of the system is dependent on how much you’re actually invested in the system.”
However, there is a catch: creating a proof-of-stake algorithm is difficult to do. While many jobs claim to have thought of a secure protocol, Micali believes a number of those claims are still questionable. “The truth is, people are able to claim anything they need,” he said.
Among the biggest challenges in proof of bet is that the “nothing at stake” problem. If the string forks, the best solution for any coin holder is to extend both chains to earn extra block rewards or to double invest. That goes against the fundamental design goal of all blockchains: getting customers to converge on one chain.
Some jobs are taking a look at approaches to re create their proof-of-stake protocols by adding perks or punishments to get coin holders to abide by the rules.
Micali feels that a well-designed proof-of-stake cryptocurrency ought to stand by itself, but without extra measures. He thinks bonding opens doorways to bad actors.
“Allow me to ask you, what fraction of your disposable income will you place on the table, not touch?” He said and implied that honest people will put up just a little amount, ceding control to bad actors with large pockets.
“The danger is that only poor people will give up control over a great deal of cash to control the machine. And if they earn a great deal more money by misbehaving, they’ll be delighted to lose what they put on the desk,” he said.
He also disagrees with the notion of using punishment to get users to drop in line.
Why do they do it? Because criminals are so seldom captured, he said. “So as soon as they grab you, they disembowel the bad guy.”
He continued, “would you like to oust someone who misbehaves? Of course. But a nicely organized system is one where you do not have to punish individuals.”
Bitcoin and Ethereum
Many people see Bitcoin solely as a cryptocurrency, however, Micali believes the best worth of Bitcoin and Ethereum are as enablers of clever contracts, in which users can stipulate if-then conditions about obligations.
“At the close of the day, doing only payments is simple,” he stated, adding that he didn’t wish to trivialize the problem. “Of course, decentralized payments are far better than centralized payments, but what really differentiates a cryptocurrency out of any other sort of money is that you can really do a smart contract.”
Based on that, he believes that both Bitcoin and Ethereum would gain from implementing the very best consensus algorithm accessible. Presently, the two systems are “huffing and puffing,” he said. Bitcoin is restricted to 7 transactions per minute, whilst Ethereum can process just 15 per second, in comparison with Visa’s 2,000 per second.
“In the event the blockchain climbs, isn’t it better for Bitcoin and Ethereum? In case the blockchain has a [mathematical] proof of security, isn’t it better for the users?” He explained. “If the blockchain can’t be hijacked by miners who are accountable to nobody and reside in some faraway jurisdiction, isn’t that a plus for all users?” Micali thinks so.