Byzcoin: A Bitcoin network scaling protocol that enables transaction throughput to reach PayPal standards

The Decentralized and Distributed Systems Lab at ETH Zurich published a research paper proposing a new protocol, Byzcoin . The protocol will be integrated into the Bitcoin system in a backward-compatible way, allowing the entire network to process more than 100 transactions per second with a 1MB block capacity; once the block capacity is increased to 4MB, the corresponding transaction processing volume will reach the standard of Paypal.

Cryptographer Philipp Jovanovic, a postdoctoral researcher at the lab, said the Byzcoin protocol’s consensus mechanism is highly scalable.

Byzcoin uses a tree-structured communication method, which can create logarithmic communication overhead. In addition, blocks containing transactions do not need to be verified by PoW. These blocks are responsible for the corresponding leaders and sent to the consensus group for signature.

Byzcoin consists of关键区块（keyblocks） and微区块（microblocks） . The miner who discovers the keyblock is called the leader, and is then responsible for producing microblocks containing transactions. These microblocks are sent to a consensus group for joint signatures to verify the authenticity of the transaction and confirm whether it complies with the protocol rules. The members of the consensus group are miners who have recently discovered the keyblock. Blocks can only be verified if they are signed by the majority of miners, so any attempt to double spend can be effectively prevented.

The overall architecture of Byzcoin is very similar to Bitcoin-NG. However, once a leader in Bitcoin-NG comes to power, he or she is likely to misbehave. Jovanovic said that to prevent this from happening, in the Byzcoin protocol, once a leader with fraudulent behavior is found, miners can vote, and if the votes exceed the 67% threshold, the leader's qualifications will be disqualified, and his or her economic rewards as a leader will be completely cancelled.

Byzcoin builds on other protocols by dividing key blocks and micro blocks, creating an absolute majority verification method to confirm transactions and dictate the behavior of leaders. This model brings a lot of advantages, creating instant and irreversible transactions. This model can also solve many problems, such as selfish mining.

Recently, Princeton University researcher Arvind Narayanan published an article pointing out that once block rewards are cancelled, miners’ only source of income will be transaction fees, which is likely to bring potential attack risks. Narayanan wrote in the article, “Once miners’ income shifts from block rewards to transaction fees, the economic incentive mechanism will be messed up.” Byzcoin can solve this problem.

Bryan Ford, a former Yale researcher who is now the director of the Decentralized and Distributed Systems Lab, said the main reason for the above problems is the distribution of Bitcoin mining rewards. In the Bitcoin network, miners receive rewards immediately. The Byzcoin protocol proposes the concept of delayed rewards, where mining rewards will be distributed on a daily or monthly basis , which can prevent the series of attacks described in Narayana's article.

Byzcoin is included in the Bitcoin Improvement Protocol

The paper was presented at a conference in Milan last month. According to Jovanovic, “the response has been very positive,” but “there are still several engineering issues to be solved in a real-world deployment, such as integration into the Bitcoin protocol.”

Jovanovic said they plan to submit a Bitcoin Improvement Protocol (BIP) for Byzcoin to start more detailed discussions, but he did not mention whether a cryptocurrency based on the Byzcoin protocol would be issued, but the Byzcoin protocol can be used in any type of public chain.

The Byzcoin protocol is the latest development in the effort to solve the scalability problem. The scalability problem is a hot topic in the public blockchain space, with countless discussions and research papers published on the issue. The most notable of these is the Segregated Witness (segwit) solution proposed by Bitcoin Core developers, which is currently in a waiting state. Other solutions such as the Lightning Network are also attracting attention. Development teams such as Bitcoin Unlimited advocate on-chain expansion. There is also the concept of subchains proposed by Peter Rizun, which is very similar to Bitcoin-NG and Byzcoin.

However, the Lightning Network has high requirements for network performance. Therefore, the final solution must be a combination of on-chain and off-chain expansion. This paper on Byzcoin can increase the transaction processing capacity of the network in a block capacity of 4MB or even 1MB. Without Byzcoin, most of the problems in the blockchain network may take another ten years to be properly solved.

However, it remains to be seen whether this protocol will be recognized by the majority of Bitcoin developers, or whether Bitcoin developers will propose new expansion plans based on similar concepts.