Paper 2016/871

Blockchain-Free Cryptocurrencies. A Rational Framework for Truly Decentralised Fast Transactions

Xavier Boyen and Christopher Carr and Thomas Haines

Abstract

We present a radical solution to the two foremost challenges facing ``blockchain''-based cryptocurrencies: (1) ``mining pool'' oligopolies and (2) incompressibility of delays affecting validation. Both problems stem from the Blockchain mechanism itself, which drives participants into a winner-takes-all global contest that amounts to a low-odds high-variance rewards lottery. Our proposal strips out the ``blocks''-&-``chain'' consolidation mechanism, instead repurposing the atomic transactions as the only system objects. A fully distributed proof of work, coupled with progressive and predictable rewards, is efficiently layered on top of the transaction structure. Without blocks, the cryptographic ``chain'' of transaction affirmations turns into a directed graph, whose sparseness, timely growth and global convergence are steered by game-theoretic incentives. The transaction affirmation process is _cooperative_ (rather than competitive), to entice all participants to work _solitarily_ at their own pace, rather than in pools at the pace of a blockchain. In the absence of blocks, we develop a framework that enjoys better decentralisation, improved responsiveness and natural scalability. Crucially, most of the key features of cryptocurrencies are _transaction-bound_ rather than blockchain-bound, and are thus compatible with our framework---e.g., scripting, multi denominations, _smart contracts_, etc.