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Why NXT Ought To Be Taken Seriously
Why NXT Ought To Be Taken Seriously
honest, out of fear that the loss of value of their stake would outweigh the
advantages of a successful double-spend. The main problem with this assumption
is that different people rarely have the same idea about what constitutes selfinterest. Imagine, for example, a situation where a large stake holder in Peercoin
is an even larger stake holder in alternative monetary schemes and stands to
benefit from the Peercoin capital exodus by being on the receiving end of that
exodus in his other investments.
The natural solution to the problems outlined in Peercoin is to introduce
randomness into the selection of which stakeholder wins the right to author a
block. It sounds simple, but in reality, it is not as simple as it sounds. The system
cannot simply hash the previous block and use the digest as the parameter for
selecting the winner (the right to author the next block) because the block
authors would simply contrive transactions that will cause the block to digest into
a hash that gives the right to author the next block. In-fact, you cannot base it off
of a digest of any part of the block that the author has free reign over, or we run
into the same problem. So here is the trillion dollar question: How do you arrive
at a series of unpredictable but consensus verifiable number without proof of
work? This is NXT's key innovation.
In abstract, it works by having the author of the next block be selected by
comparing the author's public key containing his stake to the public key of the
author of the previous block. The quantity of his stake multiplies the threshold for
applicable submission. In-order to prevent an attacker from simply creating a
public key that will win, and loading that public key with his stake, NXT introduces
the idea of effective stake. Only stake that has remained stationary for 1440
blocks (24 hours) has the right to author a block. Since forgers regularly drop on
and off of the network at various times for various reasons, it will never be
possible to predict who will mint each and every one of the next 1440 blocks.
This stops the attacker from creating a public key that will win the 1441st block
and loading that public key with his stake. In-order to prevent an attacker from
creating a "trap", where if he manages to become lucky enough to author one
block in the future and he has prepared a set of funded addresses which would
"catch" the subsequent blocks, NXT does not only rely on the previous block
authors signature alone, but instead builds an entirely separate "block chain"
which is the result of hashing every public key ever used to author a block.
The more astute among my readers may notice a bit of a chicken and egg
problem here. How does the network protect itself against an attacker on block
two if there is no way for that author to have had his stake remain stationary for
1440 blocks? The answer is that the dev(s) never really did describe a proper
solution to this problem, as an attacker could have exploited the chain on block 2,
but they didn't. And now, at this point, it's a bit like a ball rolling down a hill, it
has gained the necessary momentum to sustain itself indefinitely.
In addition to solving some of the previously mentioned problems with proof of
work, NXT also offers a number of potential advantages. While it is not possible to
predict who will author the block 1440 blocks from now, it may be possible to
predict, one, two or maybe even ten blocks into the future. What this means is
that, if a merchant trusts the next six forgers in line to author the next 6 blocks
(perhaps because they have a long standing reputation for honesty), then it is
equivalent to the merchant as if this transaction has 6 instantaneous
rightfully deserve, for the risk they have legitimately taken, and the necessity for
a certain level of decentralization in a decentralized network. For me, the amount
that would make me personally feel comfortable would be no single individual
owning more than 1% of the total currency supply. That would amount to a max
of 10 million coins per single individual. Furthermore this is not a problem that
can be put off for later, if it is not addressed soon, then there will be no later for
NXT.
Often NXT is touted as the future of decentralized exchange. This very may well
be true, in fact I think it probably is true. However the ability to implement this
feature is not in any way unique to this platform. Any other crypto-currency could
be used for exactly the same thing. All we are talking about here is a promise
from the developers to include in their platform, a feature, that any other cryptocoin developer could have also promised to include in his had he chosen to make
such a promise. Decentralized Alias System, Decentralized DNS, Arbitrary
Messaging, Distributed Storage, Voting System, Reputation System and Smart
Contracts are all further examples that fall into this same category.
I am not prepared to give investment advice; however, I am prepared to tell you
that if you ignore the ideas behind NXT, then you do so at risk. Even if this
particular implementation of these great ideas fails, the ideas themselves are
here to stay, and they are going to fundamentally alter the crypto-currency
landscape forever.
Donations:
NXT: 14075156995145364873
BTC: 1J68eajnyueiLeYdaBUiVySFhPiwpafzmY