The NeuCoin white paper is ready for review
The NeuCoin Project just released its technical white paper:
“NeuCoin: the First Secure, Cost-efficient and Decentralized Cryptocurrency”. It is available as a PDF version on this link:
neucoin.org/en/whitepaperWe hope that this white paper will spark the first honest and fact-based debate on the pros and cons of the two main consensus mechanisms used in peer-to-peer cryptocurrencies: proof-of-work and proof-of-stake. Bounties will be awarded for constructive feedback, see below for details.
Our white paper gives an in-depth analysis of the following elements:
Bitcoin faces mounting problems: mining consolidation, higher transaction fees in the long run if transaction volume doesn’t scale dramatically, and a misalignment of interests between corporate miners and Bitcoin holders.
The Proof-of-Stake consensus mechanism solves these problems thanks to two major changes:
- It rewards miners based on number of coins owned rather than amount of electricity and computing resources spent - effectively replacing the operating costs of proof-of-work mining with the capital costs of holding coins;
- Mining rewards are proportionate to number of coins owned and time held, making them akin to “interest payments” on the miner’s coin holdings.
Thus far, Proof-of-Stake has been dismissed by much of the crypto community based on the umbrella objection that there is “nothing at stake.” What is meant is that since proof-of-stake mining does not consume any outside resources (electricity, computing power), miners have no costs, so nothing prevents them from endlessly trying to commit double-spends, or mining on multiple branches, no matter how low the odds of success. Since there is “no cost” to behaving maliciously, proof-of-stake systems are unsecured and can’t even reach consensus. They ask, “how can you have security without paying anything for it?”
What proof-of-work proponents are neglecting to see is that proof-of-stake security does have a cost: the capital cost of acquiring and holding coins. The brilliance of proof-of-stake is that it turns all coin owners into security providers, and requires any would-be attacker to purchase a large amount of the currency to attempt an attack, which would be an attack on his own wealth.
Besides ignoring the reality of capital costs, proof-of-stake critics are also prone to depicting scary-sounding attack vectors against proof-of-stake - grinding through the blockspace, rewriting history with old private keys, long-range, pre-programmed double spends - without explaining the details of how these attacks would be conducted or demonstrating mathematically that they have more than an infinitesimal chance of success. The truth is, these attack vectors do represent valid areas of concern, so it is interesting to ask why the critiques are always theoretical and never concrete.
Perhaps by leaving the critiques abstract, without even mentioning Peercoin, NXT, Bitshares, or Blackcoin, etc., with all their different parameters, the point is made that proof-of-stake’s “nothing at stake” flaw is fundamental and nothing can be done to fix it. Or it could simply be that analyzing the odds of success of a given attack vector against a specific proof-of-stake implementation isn’t worth the effort. Besides, none of the existing proof-of-stake coins have published substantial rebuttals to the various critiques.
NeuCoin’s design answers the “nothing at stake” argumentTo choose the parameters and features of its own design, NeuCoin began by researching and mathematically modeling all the potential attack vectors against a proof-of-stake cryptocurrency: double spends, history revisions, grinding attacks, and preprogrammed attacks. In the end, NeuCoin believes that it was able to architect a proof-of-stake design that defeats all these attacks and addresses all “nothing at stake” issues.
There are three critical elements to its design:
- High mining incentives: NeuCoin provides much higher mining rewards than existing proof-of-stake currencies in order to maximize the percentage of coins being mined at all times. The odds of success for all attack vectors in proof-of-stake are based on the percentage of staked coins that the attacker controls, so it is paramount to maintain a high percentage of all coins staking across time, which existing proof-of-stake coins fail to do. To further bolster mining participation, NeuCoin reduced minimum stake age to one day (from 30 days in Peercoin) and abandons the use of coin age as a factor influencing the probability of generating a block.
- Redesigned stake modifier: NeuCoin chose to adapt a version of BlackCoin’s stake modifiers, which floats over time, rather than use Peercoin’s design, which permanently fixes the stake modifier after the initial modifier interval. NeuCoin chose this design because Peercoin’s design is susceptible to preprogrammed long-range attacks. Moreover, the modifier interval and selection interval parameters were substantially adjusted to minimize the threat of grinding.
- Duplicate stake punishment: NeuCoin uses a client version developed by Michael Witrant aka “sigmike” (core developer of Peercoin and Technical Advisor to NeuCoin) that not only detects duplicate stakes so that honest nodes can reject them, but also punishes nodes that broadcast duplicate stakes by rejecting all blocks broadcast by the dishonest miner.
We hope to gather comments and questions from the crypto community as we consider this to be the first draft of our white paper. This work is meant to be useful for the crypto community as a whole and to highlight that there is a strong alternative to Proof-of-Work.
White paper bounty program:NeuCoin
bounties will be awarded by the NeuCoin Code foundation for all constructive input, both positive and critical, you will find details here:
http://forum.neucoin.org/t/white-paper-bounty-program/Valid contributions will be expected to be submitted at
forum.neucoin.org 
