Seed - Literature Review - Introduction - The Flaws of Proof-of-Work (Part 1)

The Seed Project

This literature review will focus on the flaws surrounding proof-of-work, how it causes a misalignment of interests in users, the inefficiencies of the mechanism, and explored alternative mechanisms. Here I will establish the background information surrounding blockchain technology which has led to these issues. The literature review will be split apart into a few isolated parts, with this being the introduction. This literature review is the first part of my research proposal, which I intend on executing during the creation of my research project, Seed. The end aim is to develop and prove an alternative block confirmation mechanism to traditional, competitive methods which takes a cooperative approach.

It is important to note that this is my literature review and does not perfectly reflect the end outcome of the Seed project. My partner, Jaegar, has done his own literature review on the matter which differs in certain aspects, which will hopefully get posted in the near future. We did these literature reviews separately in order to branch out our knowledge and come to our own independent conclusions.

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​Blockchain technology has been a rapidly growing interest over the last few years in technology focused communities, as well as in investment focused communities. From blockchain technology grew Bitcoin, the first blockchain based digital cash to solve the double spending problem. Bitcoin paved the way for a new genre of digital currencies known as cryptocurrencies, most of which rely on the proof-of-work mechanism developed by Satoshi Nakamoto during the development of Bitcoin. Proof-of-work is a mechanism used for determining the order in which transactions took place. In the system a type of user referred to as a miner utilizes their GPU time to compete in a race over hashing and validating a block of transactions. The first miner to verify all the recent transactions were legitimate, and to show the appropriate work as proof to other miners, earns a payment in Bitcoin for their efforts [1][2]. This system secures the Bitcoin network and allows for alternating independent individuals to contribute to the decentralization of the blockchain, without any centralized servers or governing bodies. Proof-of-work has been successful in providing security to a decentralized network, however it isn’t without consequence.

It results in a misalignment of interests between general users, who want a fast, low-fee network, and miners, who are motivated by returns on their investment. Proof-of-work is also purposely inefficient in it’s processing usage, as it requires multiple miners to each spend processing time verifying the same transactions, with each miner expending energy trying to find valid work. My research question, “How would one replace competitive proof-of-work with cooperative proof-of-play for decentralized blockchain game servers”, is aimed at addressing the issues with proof-of-work and layout an alternative tailored for a decentralized videogame server.

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[1] Nakamoto, S. (2008). Bitcoin: A peer-to-peer electronic cash system.
[2] Decker, C., & Wattenhofer, R. (2013, September). Information propagation in the bitcoin network. In Peer-to-Peer Computing (P2P), 2013 IEEE Thirteenth International Conference on (pp. 1-10). IEEE.