Proof of Work Assessment 3

1.Which statements are true? (one correct selection necessary to proceed)

A system such as One-IP-address-one-vote or proof-of-stake can be gamed by accumulation of resources that aren’t representative of an investment in the reliability and security of the network.

Proof-of-Stake and IP based voting allows for greater investment in network infrastructure than Proof-of-Work as more capable hardware allows for Proof-of-Stake nodes to better monetize their position.

It is only via proof-of-work that all network participants can be evaluated on an even footing as to their node’s capability and suitability to create blocks and to receive votes from hash generating CPUs.

Proof-of-work incentivises a race to find the most efficient ways of processing block headers and has already led to advances in hardware which have driven the block difficulty rate up many orders of magnitude since the beginning of the network.

2.What is the significance of “one-CPU-one-vote”?

“One-CPU-one-vote” means that even if your node is not capable of satisfactorily building blocks you still have a say in what types of blocks are acceptable.

“One-CPU-one-vote” means that everybody who has a computer should have a say in how the Bitcoin network operates.

By providing each CPU with a vote, Bitcoin requires users to run their own node.

Without a CPU to provide proof of work, a node cannot participate in the block building process. CPU based proof-of-work requires the accumulation of infrastructure and the expenditure of energy to build blocks, a process that is not able to be faked.

3.How is the “majority decision” represented and what is the process by which it is obtained?

By using the accumulated proof-of-work of the whole network as a means to determine the validity of any given block or transaction. This is simply seen by looking at the longest chain of blocks that has been produced in order to determine where the greatest amount of work has been applied.

The majority decision is represented by the majority of users signalling their desired outcome.

The majority decision is the path represented by the nodes which produce the majority of blocks.

The majority decision is represented by the votes of the ‘whales’ which control the majority share of bitcoins in circulation.

4.What must be maintained in order for dishonest nodes to extend their chain faster than honest nodes and what will be the subsequent result?

For dishonest nodes to maintain their lead and control the longest chain they must ensure that no blocks are found.

Dishonest nodes need to maintain a spam attack by sending millions of low value transactions to clog up the memepool and slow the block discovery process.

For dishonest nodes to maintain their lead and retain the longest chain they must continuously perform proof-of-work at a rate equal or greater than that of the honest chain for an indefinite period. This strategy is extremely costly to pursue as attackers risk losing both the cost of the proof-of-work and the value of the coins earned.

Dishonest nodes need to maintain faster internet connections in order to find blocks faster than other nodes.

5.What is required for the honest chain to remain the longest and easiest to follow?

As long as more than half of the CPU power used to perform proof of work is controlled by honest nodes the honest chain will remain the longest chain.

One honest node.

For users to understand their responsibility in verifying the chain of blocks.

For nodes to only accept blocks with high fee paying transactions.