Consensus in Blockhain, What is that ?
First, the second concern described above regarding the centralization of mining power applies equally to Proof of Stake. When a new Proof of Stake blockchain launches, it has very often all the tokens that will ever exist “pre-mined”. As a new blockchain is known by few, it is very likely that, either at the launch of the blockchain or at a later time, a majority of the tokens are in the hands of only a few participants that can distribute them in many anonymous accounts.
These few participants will create almost all of the blockchain history, as well as claim any rewards such as the transaction fees, meant to incentivize the entire network to run nodes. If one party owns 51% of the stake or parties who own as much decide to conspire, they can effectively censor the transactions which are accepted on the blockchain, or at a later time create an alternate history that will be accepted by the rest of the nodes.
Second, even in the event that the block-creating power is well-distributed, someone could come in possession of the private keys of accounts which, even if they are now empty, at some point in time had a large stake. Using those accounts an attacker can create an alternate blockchain history that starts from the time those accounts had a large balance. This alternative fork may be seen, by other nodes, as the most authoritative chain, forcing them to switch to it. An attacker might purchase past private keys for less than the potential gains of creating an alternate blockchain history. Similarly, if someone discovered a vulnerability in the node software which allows private keys to be copied from the servers, they could quietly collect enough of the participants’ keys to take over the blockchain.
Importantly, as Proof of Work advocates note, creating an alternate chain would require only trivial energy to be invested, and so this hijacking of a Proof of Work blockchain could be performed quickly and cheaply once the necessary keys were collected. This second concern is exacerbated by the first: the more centralized the blockchain is, the more vulnerable it is to outside manipulation.
In fact, if at any point in the blockchain’s history the majority of the block-creating power was controlled by only a small number of private keys, anyone who can get their hands on these few keys, even if those accounts now are empty and abandoned, can effectively re-write the blockchain history from that time forward and have it accepted by other honest nodes running the network at the time of their choosing in the future.
Delegated Proof of Stake Consensus
One of the most popular modern approaches to improving the scale of a blockchain network is to use “Delegated Proof of Stake” Consensus, where the accounts of the blockchain vote, with their stake, a small number of nodes, running large enough hardware, to become block creators and thus support a high transaction volume blockchain.
While this approach can dramatically increase the throughput of the network, it does so at the expense of decentralization, having similar flaws as conventional Proof of Stake and small Federations. As described above, specifically, the ease of quickly collecting enough stake to control the network, and the ability of a small number of block creators to conspire to censor transactions.
While recognizing the importance of creating more scalable blockchain technology, a pseudo-centralized approach is not the correct path. Dencities aims for the technical and financial requirements of operating a node to not exceed those available to the average user, enabling a blockchain that is directly operated by a large number of small, independent actors. Dencities offers a solution which both vastly increases the number of keys which would need to be compromised to rewrite the blockchain, and makes it significantly more difficult for such actors to conspire or be coerced by an adversary seeking to censor the blockchain.
