Paper 2025/592

DSM: Decentralized State Machine - The Missing Trust Layer of the Internet

Abstract

The modern internet relies heavily on centralized trust systems controlled by corporations, governments, and intermediaries to manage authentication, identity, and value transfer. These models introduce fundamental vulnerabilities, including censorship, fraud, and systemic insecurity. The Decentralized State Machine (DSM) addresses these issues by introducing a mathematically enforced trust layer that eliminates the need for consensus mechanisms, third-party validators, and centralized infrastructure. DSM enables quantum-resistant, deterministic state transitions for digital identity and value exchange—offering immediate finality, offline capability, and tamper-proof forward-only state progression. DSM replaces traditional blockchain execution models with deterministic, pre-committed state transitions, enabling secure, multi-path workflows without requiring Turing-completeness or global consensus. The protocol architecture is based on a straight hash chain with sparse indexing and Sparse Merkle Trees (SMTs), ensuring efficient verification, scalability, and privacy. A bilateral isolation model supports asynchronous, offline operation with built-in consistency guarantees. DSM introduces a sustainable, gas-free economic model based on cryptographic subscription commitments. This paper outlines the architecture, cryptographic foundations, and security guarantees of DSM, and demonstrates how it achieves verifiable, trustless interaction between peers—both online and offline. By decoupling security from consensus and enabling self-validating state transitions, DSM offers a practical and scalable alternative to conventional internet trust models.