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

Sunday, July 22, 2018

Proof of useful work via optimizer transactions

Proof of useful work is one of the holy grail of the blockchain space. Although there are initiatives, like proof of useful work via proof of stake, where coins at stake would be generated at actually computing something useful, the scheme does not provide the possibility to integrate the useful work into the transaction processing itself. Platforms like decentralized IOU networks would require that the transaction processing and optimization form one common system and optimization is integrated part of the mining or transaction validation. 

One way of doing would be to have a separate kind of a transaction, called optimization transaction and a special type or role called optimizer. Optimizer would analyse the state of the last known blockchain and the other proposed but still not mined optimization transactions and it would propose new optimization transactions. These transactions would be placed in a special transaction pool, containing only the optimization transactions. The task of the miner is to collect a set of normal and optimization transactions and put them into a block in a way that the whole set is consistent. Consistency here does not only mean avoiding double spending, but it might be actually something more complicated. A new block is formed by a set of standard and optimization transactions, and the new system state appears as these transactions are applied to the existing state. 

Certainly, it is an open question how exactly the system can be fine-tuned, among the others, the following points should be considered:
- Blocks should be motivated to contain both standard and optimization transactions on average, otherwise we land either on a standard blockchain or on a kind of a  purely optimizer based structure. However finding such a set of transactions should happen in a computationally efficient way, otherwise there would not be any guaranteed blocktime.   
-  Optimizers should be motivated to create as efficient optimization transactions as possible. The incentive mechanism can be based like on the measurement of the efficiency of the optimization algorithm, an internal cryptocurrency, transaction fees ...
- It is an open question how the optimization transactions can be combined with the standard transactions in a cryptographical sense ?
- It is another open question how the 2 member market will change with the appearance of the third party (optimizer), it is similarly a question how classical attacks against the blockchain will be effected ?