Unchaining the Blockchain Network Layer

Klarman, Uri

doi:https://doi.org/10.21985/n2-ypvh-4t64

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Unchaining the Blockchain Network Layer

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Blockchains are an exciting new type of Peer-to-Peer (P2P) distributed systems, which enable parties to transact directly, and maintain the record of said interactions in a distributed manner. A unique feature of blockchains is their ability to maintain a consensus without requiring knowledge on the number of participants, nor their identities, opening the door for cross-border, self-organized, decentralized, open ecosystems. The original blockchain, Bitcoin, aims to be a Global P2P Electronic Cash System, and to replace fiat money, banks, payment-processors, and other financial middlemen. Other blockchains, e.g., Ethereum, aim to remove middlemen from other types of interactions, such as replacing custodians with Smart Contracts, and to securely store credentials, identities, health records, and private information. While blockchains have the potential to be transformative in many fields, their real-world usage is held back by practical limitations. First and foremost, for a blockchain to be used at a global scale, it must be capable of handling a high volume of transactions; for Bitcoin to replace Visa, MasterCard, PayPal and other payment processors, it must be capable of processing roughly 5,000 transactions per second (TPS), the average number of TPS these companies process today. To support online shopping, it must support peak demand, which for Alibaba stands at 325,000 TPS. In contrast to these significant requirements, Bitcoin can only process 3-4 TPS. Other significant limitations include the centralization and wastefulness of blockchain mining, the procedure which records transactions in the blockchain. Research in the blockchain field had thus far focused on new cryptographic primitives and alternative blockchain protocols to address these real-world challenges, while the networking aspects were largely ignored. In this thesis, I propose a definition for the blockchain Network Layer, and provide evidence that the Network Layer is the bottleneck and root-cause for some of the most pressing challenges blockchains face today. I further propose new networking primitives and novel network utilization methods, and explore how they can be used to overcome said challenges, including scalability, mining centralization, and mining wastefulness, as well as to utilize blockchains to decentralize existing knowledge silos. First, I provide the necessary background to understand the operation of blockchains, and a definition for the blockchain Network Layer. Then, I present an analysis which outlines how the Network Layer is the bottleneck for blockchain scalability, and suggest a new networking primitive, the Blockchain Distribution Network (BDN) to overcome both blockchain scalability and mining centralization. Lastly, I present novel networking methods which enable blockchains to be utilized in new fields, focusing on the decentralization of the search engines market, and mitigate mining wastefulness.

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