...by Daniel Szego
"Simplicity is the ultimate sophistication."
Leonardo da Vinci

Thursday, December 28, 2017

Notes on Nakamoto Consensus

From a theoretical perspective in a blockchain protocol a Nakamoto consensus works as a lottery game, the one who wins the lottery gets the possibility to create the next block. If the next block is faulty or there is a cheat, than there is a huge possibility that the new block will be not propagated successfully to the network, so the winning node does not get a reward. The winning lottery combination or "ticket" is actually a nonce value of the block that is both consistent with the previous block hashed and with the difficulty of the system.

The analogy is actually not 100%, in a blockchain style lottery system the winning ticket might be different or individual for each miner because the coinbase transaction is different for each of them. There should be on a long term always one winning ticket, in short term however it is possible that winning tickets are competing to become final one, it is practically called as standard forking.