...by Daniel Szego
"On a long enough timeline we will all become Satoshi Nakamoto.."
Daniel Szego

Saturday, November 17, 2018

How to create a native random oracle with Nakamoto consensus

Creating a real native random oracle is one of the holy grail of the blockchain industry. As the problem is not so difficult if the consensus mechanism is a quorum as the nodes participating in the consensus making decisions independently from each other, it is more difficult at a Nakamoto consensus. The problem is with the Nakamoto consensus that the temporal leader creating the next block is practically a "dictator" of the next block and can influence like the random number. The algorithm can be however improved here as well with two ideas:
- creating a real random number is taking several round where several node guesses a random number which are then aggregated at the end. Certainly this is not necessarily a real solution as active leaders might see the previous random values and might influence the next influence in way that is profitable to the nodes. To avoid such a situations we could use the following idea:
- the random numbers are encrypted by a public key of a requestor. As a consequence the next node do not really see the previous values of the previous blocks, so it can not influence the final result.

The full multi-block native random oracle algorithm can be described as follows:

1. An imitator having a {Priv, Pub} private and public key pairs creates a random oracle request that includes the pubic key as well:

request_random (Pub, N)

, where Pub is the public key of the requestor and N is the number of round during the random number has to be generated.    

2. At mining or validation, a miner or validator creates a native random number which is encrypted by the public key of the reqestor and put at in the request itself. So after the first validation, the request will look like:

request_random (Val1)(Pub, N-1) 

where Val1 is the generated random number encrypted by the public key. To ensure security Val1 value should be put into the blockchain as well, not necessarily forever but at least during the N phase of execution of the random oracle. So with other words, the request would be splited into two parts:

request_random (Val1) 

will be written into the blockchain

request_random (Pub, N-1)

can be available as a new transaction request that is propagated throughout the network in transaction pools, waiting to be mined or validated. Similarly, after k<N rounds, there would be k encrypted random values in the blockchain:

request_random (Val1)
request_random (Val2)
request_random (Valk) 

and a new request as a transaction which is 

request_random (Pub, N-k)

3. After N rounds, the requestor can aggregate the random values and decrypt them with the Priv private key. 

Rand1 = Decrypt_Priv(Val1)
Rand2 = Decrypt_Priv(Val2)
RandN = Decrypt_Priv(ValN)

The individually generated random numbers should be aggregated in a way that the randomness is preserved even if some of the values are not really randomly generated. The exact algorithm here is questionable, but it is important that the original entropy of the requested random number is maintained even if some of the nodes are cheating. Ideas might be:

sha256(Rand1, Rand2, .... RandN)
sha256(Rand1 xor Rand2 xor ... RandN)
sha256( ... sha256(sha256(Rand1))... )
The algorithm has two drawbacks that can be fine-tuned on a long run: 
- The algorithm takes N rounds to find out a real decentralized random number. This can be pretty long and pretty costly depending on the given blockchain platform. Considering a Nakamoto consensus the algorithm is pretty difficult to speed up, as the basic idea is that random numbers are comming from N individual different sources that actually means at a Nakamoto consensus N different blocks. 
- Based on the evaluation algorithm we should assume that some of the miners or validators created a good random number. Consider a good byzatnine evaluation function at the end even if some of the nodes cheat the resulting random number can be a good one, like cryptographically secure. The problem is however that even the hones nodes are not really incentivized to create good random numbers, hence we can not really measure or punish if nodes produce good random numbers. It can be certainly an assumption that certain number of the nodes are honest, but actually it would be much better to measure and validate this fact. 

A further question can arise how the data exactly used like within a smart contract. As private keys should not be stored in the blockchain, there should be an additional round with the wallet software to encrypt and aggregate the information which might introduce elements of unnecessary centralization and difficult to build in directly into a decentralized smart contract. It is important to note however that this private key is not necessarily the same as the private key of the account so it can be actually revealed as soon as all the N nodes created a guess for a random number. As a consequence a second transaction can be used to calculate the real random number, like:

evaluate_random (Priv)

At this moment the private key can be published to the blockchain and the evaluation algorithm can be implemented with a smart-contract in a decentralized way.

From a practical point of view a smart contract with built-in native random oracle would look as:

function with_rand (input params) return (output params) {
   variable ´= Rand();

for evaluating such a smart contract, there should be two transaction used:

- the first one would call the function with a public key of the random oracle making the initialization in the secret random numbers.

transaction init with_rand pub_key_rand

- the second transaction would publish the private key and make the whole evaluation and the execution of the rest of the business logic, like:

transaction exec with_rand priv_key_rand

The proposed system has unfortunately one denial of service attack possibility. The one who initiated the random oracle has the private key and can calculate the result previously. If this result does not make benefit for him, he choose not to reveal the private key or not to execute the second transaction.