Thursday, April 4, 2019

Blockchain and individual freedoms

Individual freedoms are important to most Americans.
We believe that some type of representative democracy is an insurance against dictatorship.
We value our freedoms and we believe that they are conductive to a free society, innovation, progress and a better standard of living for all.
It is apparent that when institutions public or private, are centralized and become more powerful they  attract
people interested in seeking power. The concentration
of power at the top of these organizations often leads to abuses of power.
The majority of people, who earn their reputation and remuneration in life by servicing other people are not interested in acquiring power and control over other
people. We all benefit when our neighbors and friends are happy, free, honest and successful.
The average person builds, creates, innovates, learns, solves problems, risks, invests and provides products and services to others, values other people freedoms, may be self-reliant or more social, may be hard working or highly productive.
If you are this type of person and do not seek to influence and control others, then probably your goal is not to be promoted through the ranks and eventually to the helm of a powerful, centralized organization. Those positions are instead filled with people who think they know better and seek positions of power and control over others. Only in rare cases, when they have developed a strong ethical philosophy that has been tested during their lifetime, such people may have the fortitude of caring about the opinions and individual freedoms of others.
It is not surprising then, that the average person has become resentful of centralized institutions: whether these write laws and regulations, establish the value of our currency, control the way we work, gather and use our private information through social media, or choose the news we are presented with.
Centralized institutions limit or infringe on personal freedoms in the following areas:
Misinformation and censorship
Americans have become more careful about the source of their news. With the pervasive use of the Internet, web news sites and social media sources have become more influential, and consequently more controlled by people with a political agenda.
Powerful sources may create news that conform to their agenda (misinformation), and block news that are contrary to their agenda (censorship).
While many independent sources can be found on the web, this usually involves some time and effort, while large news services are more visible, especially when the browsers we use are possibly biased and programmed by large organizations.
The entertainment industry, because of the large funding requirements for production of television programs and movies, still has a large influence on the masses.
Freedom of speech and freedom of religion are the first victims of centralized, influential
news services.
Privacy and Security
Large and influential institutions may feel they are above scrutiny and decide to gather and keep private information about their customers. Recently we have heard of several cases in which institutions and organizations have gathered private information without consent, or compromised private information. In other cases, account passwords have been stored in readable form and exposed to the company's employees.
Currency creation and distribution
Money is the representation of the work we do: products we create and services we provide. Since work occupies a major share of our life and earned money is a measure of that effort, money is important to us, not only as a means to acquire personal property, but also as a means to help others.
When the money supply is arbitrarily created and controlled, whether by the central banks or by regulations, the effects may be economic hardship for many and possible advantages for a few.
The Blockchain promise
Blockchain technology promises to help in all of the above areas, by providing the basis for
  • a distributed design of news services and social media applications, so that people can have more uncensored sources available and can gauge the reputation and reliability of
    those sources;
  • better security of private and personal information, whereby the unique identification of each person is assured and does not depend on releasing of private information; and
  • an alternative currency not controlled by a central institution, but by an automatic algorithm, that can provide price stability. A currency that can be used as a fiat currency for invoices, loans salaries, and for trading worldwide.
However, ten years after the introduction of this technology in public networks, these promises have not been fulfilled. The few public networks that have maintained independence from large organizations (unpermissioned networks) have problems of scalability, efficiency and cost.
Bitcoin cannot support applications and its currency is volatile. Ethereum, which theoretically can support distributed applications, at this time has problems of scalability and cannot support a single application the size of a social network.
The good news is that a completely different approach is now been proposed to fulfill the blockchain promise. New, stochastic networks, using different designs and protocols, are on the way, solving the problems that have stalled blockchain technology for years.
The proposed network model is not de-centralized any more, but distributed and stochastic. In the distributed model, there are no classes of nodes and there are no intermediaries (miners, verifiers), but each node is equally involved in the verification of transaction and maintaining the security of
the network.
The proposed consensus protocols are also new: All current blockchain-based consensus protocols, more than sixty varieties of them, are leader-based. One node broadcasts the block to every other node. The proposed protocols are not leader-based but reach an agreement on the composition of the block among a majority of peer nodes.
This evolution of blockchain technology is described, for example, in the article at:
This transformation will solve the current problems of scalability and allow distributed applications with high data transfer requirement to use blockchain networks. Software development companies will be able to use a more functional distributed operating environment for their applications.
The blockchain will be replicated on all user devices. The advantages for users will be: usability, security and transparency.
These new developments will also open the way to the use of superconnectivity, the connecting thread between blockchain applications and the IoT world.
Stochastic, fully-distributed crypto-networks will soon fulfill the blockchain promises, revitalize the blockchain industry, disrupt crypto-mining industries, reduce energy utilization, provide an alternative to current crypto-networks and effectively revolutionize the distributed application world.

Giuseppe Gori is the CEO of Gorbyte (, a blockchain research, development and innovation company. Gorbyte started researching distributed consensus models a few years ago and is currently developing GNodes, a new crypto-network that uses the first blockchain-based, distributed consensus protocol, called MARPLE. When MARPLE is used as a consensus protocol, all nodes participate in assembling the block, and in verification and security functions, without the need of intermediaries or monetary reward. Gorbyte is currently raising private funds through a security token offering STO in partnership with DealBox (Carlsbad, CA, USA) and TokenIQ (Phoenix, AZ). The funds are being used for the development of GNodes.

Blockchain: De-centralization Is The Problem

De-centralization is one of the buzzwords of blockchain technology: companies and web sites have sprung up that include this word as part of their name.
De-centralization has been touted as a most advanced feature in fintech. The acronym DLT (De-centralized Ledger Technology) has become a synonym for blockchain in the fintech permissioned environment.
Few realize that de-centralization is itself the problem. This concept has kept blockchain technology stalled for many years. Let me explain.
In the 1960s, computer systems were centralized, or configured as a star network. Only in the early 1970s did the need to connect computers from multiple manufacturers become urgent.
At the time, the nodes of the few existing communication networks were typically organized hierarchically, but from the very beginning the protocols implemented in the nodes of the ARPA, RPCNET, PISA and other groundbreaker networks preceding the internet were designed with the general idea that no central node or authority should control, lead, be the center of, or own the network.
In other words, we knew that a centralized, star, multi-tier network, with its innate bottlenecks, was not going to satisfy even the 1970's requirements of thousands of users. We also guessed that by reducing the number of bottlenecks through de-centralization the problem would be reduced, but not solved. We knew that a solution would have to use a distributed peer-to-peer model.
Since many organizations would be involved in the provision of nodes, links, possibly unreliable hardware and software, we had to assume that the network was unreliable. We did not know how a consistent set of data, or even a single transaction, could be maintained in multiple databases through an unreliable network when any node could generate a message or, in fintech terminology, a financial transaction. The problem was further compounded by the presence of deliberately malicious players.
Why blockchain technology has been hindered by the de-centralization idea
In general terms, we recognize that a network is de-centralized when the control of the network is shared among a subset of the network's nodes.

A network is distributed when all nodes equally share responsibilities and run the same node software.

De-centralized (permissioned and leader-based) networks were often extensions of centralized networks deriving from application requirements, for example by the fintech industry.

The blockchain network software (basic system software) should not be designed according application requirements, as these will change. We did not design the network precursors of the Internet and the Internet itself based only on the requirements of 1970's applications. We could not have predicted what industries would develop based on the ability to share information globally.
In the same way, the underlying blockchain network should be as general, flexible and scalable as possible. The permissioned, client-server, and private network requirements can then be considered as special cases of a distributed network, for example by using the concept of Virtual Private (blockchain) Networks.
Distributed networks are more likely to be independent of any specific physical structure. Nodes can dynamically connect to each other and random connection procedures could possibly be used. Consensus solutions implemented on distributed networks can also be unpermissioned, majority-driven and recursive.
Distribution, not de-centralization, should have been the main objective of crypto-network design.
Why we failed
The failure to investigate distributed consensus agreements partly derives from the 1982 formulation of the Byzantine Generals' problem which models how information integrity can be maintained in an unreliable environment. The Byzantine Generals problem has been studied by researchers for over thirty years.

The analogy of several allied army divisions holding a city under siege correctly assumed that no-one in the field could be trusted to deliver a message and that some of the generals themselves could not be trusted when issuing a command.

However, the formulation of the army analogy suggested at least two classes of troops: generals and soldiers.

Some people then restricted their thinking to a more specific case in which the generals issued commands that needed to be both carried to other generals and protected from tampering by attackers or traitors.

Eventually, this approach led to a limited definition of the consensus problem.

Leader-based consensus models such as Paxos and Raft were and taught in universities and adopted as models by designers of implementations of blockchain networks.

As a result, practical solutions of the Byzantine Generals problem focused on various methods for selecting a leader node, which would send a block of verified information to all other nodes, instead of seeking to achieve a consensus on the content of the block.
Missing the target
A consensus on which node should be the current leader does not solve the problem of trust. The current leader must be trusted. It must do the job of verifying and assembling blocks in a fair manner. Thus, the leader in current leader-based consensus protocols is required to provide some credentials: proof of work, proof of stake, proof of capacity or proof of anything else.
These "proofs" do not guarantee much more than a vested interest that leader nodes (or nodes aspiring to be leader nodes) may have in the network: the more interest they acquire, the less they will be willing to destroy their form of income.
These "proofs" guarantee that potential leaders have credentials, but do not guarantee that the information assembled in the block is correct, or at least that it has been verified by a majority of the nodes.
We have seen more than 60 proposed solutions based on leader-based models for various blockchain implementations. They suffer from a common fault: one node decides what every other node will store on the blockchain. The result is almost the opposite of what is required.
Summary of the disadvantages of leader-based protocols
Leader-based protocols have the following disadvantages:
  • They do not solve the problem of trust. The leader node may introduce faulty data, intentionally or not, in the block of information.
  • Rewards, associated with the work of verifying and assembling blocks, create an incentive for nodes to compete for the rewards and to be promoted to leadership positions. This incentive tends to create a special class of nodes. The network then morphs into a de-centralized network. For example, Bitcoin started as a network of peers where every node could verify transactions and compete for a reward. Today it is a two-class network (miners and users) and is controlled by large pools of owners.
  • When the assembly of a block is left to one node, one of the major requirements of consensus theory is invalidated: the agreement is not based on a majority consensus about what information will be stored on the blockchain. The only agreement reached is the method for choosing a leader node.
  • A bottleneck, or single point of failure, is introduced: One node has to broadcast a block to every other node.
  • Efficiency is not the best: large blocks of data are more subject to transmission errors and re-transmissions of maximum size packets.
  • Redundancy is almost 100%: Each transaction included in a block has already been received by every node separately, when the transaction was initially issued.
A better analogy
When thinking about an analogy for the problem of reaching a common decision in an unorganized and unreliable environment, we could have used an analogy of an army without ranks, but it would not have been very intuitive.
A better analogy could have been the challenge of deciding the daily closing price on a stock exchange. In this analogy, a multitude of buyers and sellers determines the daily closing price of stocks using a stochastic process, without any particular person taking a decision for anyone else.

In the stock market there is no "right" answer for a stock price, but just an agreed daily closing price.
Similarly, in the composition of a block several variables, such as the order of the transactions, can determine the final block composition. There is no "right" block composition, but just one that nodes agree on.

Consensus protocols based on a more distributed analogy could have avoided the tendency towards centralization and the requirement of intermediate nodes, typical of leader-based protocols.
Examples of intermediaries in a network are:
  • Miners, producers or verifiers, volunteering or engaged to provide a service to the network,
  • Special nodes of federated systems that have a stake in the success of the network,
  • Nodes elected with some criteria to perform network governance,
  • Nodes owned by trusted companies or institutions,
  • Special players, such as centralized Currency Exchanges holding user wallets.
What's wrong with Intermediaries?
First of all, it is a question of cost: If the intermediaries are doing useful work, for example verifying transactions, then they need to be rewarded.
It is also a question of trust: customers using a network with intermediaries need to trust:
  • that the intermediary is not giving preference to certain users or transactions,
  • that the intermediary has not been, or will not be, taken over by a malicious attacker,
  • that the intermediary's system is not experiencing a blackout, or targeted by a DoS attack, or experiencing a system failure, or any other cause that will affect or delay customer transactions,
  • that intermediaries' system software and data are reliable, so that data integrity and security are guaranteed.
  • that they are really connected to a trusted system and not to an impersonator (e.g., some other system pretending to be a trusted intermediary), and
  • that no other unpredictable event will happen. Recently, for example, the owner of the Canadian currency exchange Quadriga died or disappeared. As a result millions of dollars of customers' funds are missing.
Finally, it is a question of data availability. If a network has a privileged or restricted class of nodes managing the blockchain, then the majority of nodes do not have immediate access to the current replica of the blockchain. This may preclude the development of real-time applications, such as automated trading applications.
Is it too late to change the model for blockchain consensus?
Most experts will tell you that a major function of consensus protocols is to maintain the security of the network. This view confuses two issues. Security is certainly needed, but it is a completely different requirement that can be solved by other means (and this will be the subject of a separate article).
Still, many developers are stuck with the ideas that consensus means choosing a leader and that consensus is needed to maintain security.
With hind-sight, if we had thought of a better distributed analogy, the research could have turned towards a different direction, suggesting stochastic approaches and possibly could have led us to the earlier development of better distributed solutions without intermediaries.
This is now an education issue, more than a technical issue. Most researchers, consultants and experts on crypto-networks are proficient in all the details of PoW, PoS, DPoS and several dozen alternatives, all based on the same leader-based model. The few solutions that are not leader-based, are not blockchain solutions: They are solutions in which each transaction is handled separately.
On the positive side, most people and 95% of companies, according to a recent poll, understand the potential of blockchain technology.
A transition, from a de-centralized to a distributed model, is urgently required to unlock the blockchain's true potential, to solve the problems of scalability and to run the blockchain on any user device without intermediaries.

Giuseppe Gori is the CEO of Gorbyte (, a blockchain research, development and innovation company. Gorbyte started researching distributed consensus models a few years ago and is currently developing GNodes, a new crypto-network that uses the first blockchain-based, distributed consensus protocol, called MARPLE. When MARPLE is used as a consensus protocol, all nodes participate in assembling the block, and in verification and security functions, without the need of intermediaries or monetary reward. Consequently, the GNodes crypto-network does not include incentives that push towards centralization. Gorbyte is currently raising private funds through a security token offering STO in partnership with DealBox (Carlsbad, CA, USA) and TokenIQ (Phoenix, AZ). The funds are being used for the development of GNodes.

Saturday, November 10, 2018

After a Decade of Bitcoin, the Next Wave: Stochastic Crypto-networks

Have you heard of... The blockchain? Cryptocurrencies? Digital currency Exchanges? Miners? Tokens? Smart contracts? ICOs? STOs? Blockchain applications? Jobs in the blockchain industry?
None of the above would exist without a crypto-network infrastructure that securely exchanges transactions, guarantees the reliability of the network and the integrity of the replicated data (the blockchain). This technology, introduced by Bitcoin, is now ten years old.
The original goal of Bitcoin was to create a secure method of trading among peers using a currency that could not be controlled by any person, company or institution. It was then discovered that the blockchain concept it employed was extremely useful for many applications.
However, current crypto-networks providing a blockchain infrastructure, including Bitcoin itself, have morphed into networks that rely on special intermediate nodes.
In addition, the established crypto-networks are limited, costly and cannot support the many applications we envision for the blockchain.
The fixes proposed for these problems are complex and are often applied to the side or on top of existing networks none of which is fully distributed.
Other solutions also exist, that have abandoned the blockchain concept altogether.
In the last few years the idea of a scalable network of peers securely guaranteeing replicated data has been a challenge for the research community. Decades of research on Byzantine Fault Tolerant solutions (BFT) has produced only one practical (PBFT) solution, Bitcoin. But Bitcoin delivered on its promise only until its own success substantially changed its nature.

The good news is that research did not stop and new approaches for building the blockchain infrastructure are on the horizon.

The meaning of the words permission and consensus
To fulfill its original goal the blockchain infrastructure had to be free from a central authority, or unpermissioned (permission-less). Transactions had to occur between peers, without intermediate participants, in a fully-distributed network. Every node had the same responsibility for securing the network from attacks, for the verification of transactions, and had a similar probability of getting rewards.
Bitcoin started out as a distributed network - each and every node, usually PCs with fairly equivalent processing power, was able to securely exchange and validate transactions and mine rewards.
However, the Bitcoin "consensus" process (called Proof of Work) was leader-based. One node, the node that won a random computing challenge, acquired the right to dictate the composition of the block to all other nodes in the network. The addition of a block to the blockchain came with the opportunity for that winner node to create a substantial reward for itself.
The word "consensus" was not used by Bitcoin to reflect a general or unanimous agreement, but to express almost the opposite: the requirement for every node to adopt the winner's block composition. By broadcasting the winner's block to every other node Bitcoin guarantees that the blockchain replica is identical on every node.
Tendency towards centralization
In this scenario, every node has an interest in becoming the winner and cash in their reward.
Many entrepreneurs saw the opportunity and acquired powerful specialized processors in order to
increase their probability of winning the rewards. New manufacturers specialized in the production of fast hashing processors emerged and a new mining industry was born.
It became a question of return on investment: how much it would cost to acquire and run many specialized processors versus the average amount that could be earned in rewards.
This led to mining farms and mining pools, with large conglomerates of specialized processors becoming associated with one Bitcoin node. Some nodes became more and more powerful. Their influence on the network was only limited by their self-restraint. If one mining farm acquired more than half of the network's computing power, user's trust in the network would evaporate.
As a result of these developments, the infrastructure, for the Bitcoin crypto-network, soon morphed from fully distributed (all nodes are miners) to de-centralized (a much smaller number of nodes are miners).
Other crypto-networks
It was soon recognized that Bitcoin had a high cost, several problems and limitations. Many developers cloned the Bitcoin open source code, made improvements, and then released new crypto-networks.
The number of crypto-networks has proliferated to several thousands.
Permissioned networks and De-centralized Ledger Technologies
After the success of blockchain technology, spearheaded by Bitcoin, some financial sector companies realized that the blockchain concept could be integrated with their various proprietary approaches to share financial data. This technology is sometimes called Distributed Ledger Technology (DLT), but more correctly it is called Decentralized Ledger Technology.
Financial institutions, by nature, want to own assets (traditionally financial assets). By using DLT technology they may also profit by controlling and selling access to other types of assets. These networks are permissioned.
In permissioned crypto-networks, a set of special nodes act as intermediate nodes, verifying and adding transactions to their replica of the ledger. These nodes maintain the consistency of their replica of the ledger and must be trusted by all other nodes. The requirement to trust an intermediate node, a verifier, is the key distinction between a permissioned network and a fully distributed, unpermissioned network, where there are no privileged nodes with the responsibility of approving transactions. We will come back to trust in the next section.
De-centralized network designs have the advantage of higher throughput, since large resource investments can be made on a limited number of special nodes. The rest of the network nodes do not need to address and exchange data directly with each other, but only exchange data through specific, trusted nodes.
Needless to say, the original cryptocurrency users did not think much of the massive effort by software industry leaders in permissioned networks.
A real distinction?
As we mentioned, Bitcoin started as a distributed network but, because of the appeal of the reward created by its leader-based consensus mechanism, it now relies on a set of miner nodes.
Because of the high cost in electrical power required to run mining processors, many successful Bitcoin clones have adopted, or are migrating to, less costly leader-based consensus mechanisms, such as Proof of Stake, Proof of Authority, Proof of Capacity, etc.
However, while the Proof of Work mechanism was originally designed to achieve equal probability for every node to gain the reward, leader-based mechanisms today are not as democratic.
In essence, Proof of "something" mechanisms require that some uncommon property be proven before the node acquires the right to participate in rewards.
In Bitcoin, that "something" was the ability to perform computational tasks, to prove in real time that the node ran on a real computer and not on a simulated or virtual one.
For networks adopting "Proof of Stake", that "something" means proving the ownership of a large amount of the network's currency.
In all cases, only a limited number of nodes are accredited and trusted as verifiers.
In unpermissioned networks, the tendency towards centralization causes a continuous drop in the number of verifier nodes.
When the number of verifier nodes becomes small, it would be much easier for an attacker to take over the network, thus verifier nodes must be trustworthy. The distinction between unpermissioned, leader-based consensus networks and permissioned networks is therefore fading.
No distributed consensus mechanism has been implemented yet that resists the trend towards centralization.
This is not just an academic or philosophical discussion. Ethereum, after its success as an unpermissioned network used for the development of tokens, is moving towards a Proof of Stake design, with a limited number of verifier nodes. Several newer clones of Ethereum, such as Tezos, EOS and TELOS describe themselves euphemistically as "substantially decentralized".
Other networks, such as Ripple and Stellar, are popular because of their speed, even if they are the product of permissioned designs.
Has the original goal of Bitcoin has been abandoned? Do all current crypto-networks need intermediate nodes to verify end-user transactions and add blocks to the blockchain?
Furthermore, is there a solution to cost and limitations of the original networks? Those networks that claim to have fixed such problems are creating complex solutions at higher layers.
Continuing research
As I mentioned, blockchain research is continuing. The goal is still the same: to provide people with the ability to trade and exchange data directly without having to trust an intermediate entity.
When exploring the idea of fully distributed crypto-networks without intermediate nodes the following questions arise:
  • Is it possible to eliminate miners/verifiers, eliminate their rewards and fees, and still ensure the integrity of transactions?
  • How can such a network protect itself from majority, Sybil and DoS attacks?
  • Is it possible to eliminate the network tendency towards centralization?
  • Is it possible to completely abandon the idea of leader-based protocols and achieve majority agreement without ever broadcasting blocks?
  • Could such a leaderless network securely guarantee a correctly replicated blockchain on every node?
  • Could a mobile phone act as a node of this type of crypto-network?
  • Can the blockchain be stored on a mobile or wearable device?
  • Can a mobile device participating as a network node keep up with the traffic generated by all the transactions in the network?
  • Can user wallets be secured when the nodes where wallets are stored are all verifiers?
Stochastic, fully distributed networks
The vision of a fully distributed crypto-network with no special intermediate nodes and not owned by any entity is much closer than you may think. All of the above questions happen to have a positive answer when the crypto-network is based on stochastic logical environs.
The research work on distributed stochastic crypto-networks started in 2016. A new truly distributed consensus agreement has been developed, which is called the Majority Agreement Recursive Protocol based on Logical Environs (MARPLE).
Each node can find agreement with a random set of physically remote but logically connected nodes (environs). These are dynamically and continuously re-configuring. The nodes in these environs recursively and synchronously share their current block outline by using very short hash packets. When disagreements occur, they can resolve them without broadcasting to the whole network.
Because the size of each node's environs is small and does not depend on the size of the network, stochastic distributed crypto-networks are scalable and can handle a much higher volume of transactions.
The stochastic crypto-network design can guarantee application data integrity, as the consensus is reached synchronously for each block and forks disappear.
The costs associated with mining and verifying (rewards and fees) also disappear.
As an incentive to become a node of the network, users can issue free financial transactions, receive a secure wallet acting as an interest-bearing savings account, and may run highly scalable blockchain applications on their device.
At least one stochastic unpermissioned network (GNodes by Gorbyte) plans to be operational by the end of 2019 with:
  • a fully functional downloadable client code on desktops, laptops or mobile phones
  • a replica of blockchain on each and every node
  • high performance and scalability, as part of a truly distributed, unpermissioned network
  • guaranteed blockchain integrity, network security and transaction verification
  • zero network operation cost, providing no-fee financial transactions
  • a rebased, non volatile currency for practical utility
  • a distributed operating environment for scalable blockchain applications

Stochastic, fully-distributed crypto-networks will soon revitalize the blockchain industry, disrupt crypto-mining industries, reduce energy utilization, provide an alternative to current crypto-networks and effectively revolutionize the distributed application world.
Giuseppe Gori is the CEO of Gorbyte ( The company is currently raising private funds through a security token offering and will raise public funds in an STO early next year in partnership with DealBox (Carlsbad, CA, USA) and TokenIQ (Scottsdale, AZ). The funds are being used for the development of GNodes, Gorbyte's vision for a stochastic, fully distributed network featuring no-fee basic transactions with a non-volatile currency.