The three biggest flaws in Bitcoin

  • Transaction speed: All transactions run on a highly competitive chain. It takes a long time to confirm a deal is done.
  • Anonymity: All transactions are public. By analyzing history, it is possible to know all the transactions that have been done at an address in the past, thus gaining insight into all kinds of privacy and trade secrets.
  • Deflationary economy: In the short term, the problem is that bitcoin and fiat currencies have gone up and down, creating trading uncertainty. In the long run, it is an untested model to see whether replacing fiat money with bitcoin can support economic prosperity with deflationary money.

speed


Whether it’s PoW, PoS, or DPoS, the model is the same. Modeling the entire world on a shared ledger. This worldwide accounting model is the root cause of slow transaction speed. Reducing the computational complexity of consensus algorithms can only alleviate the symptoms of this problem, not eliminate it. From PoW to PoS, just scale up, not scale out.

The solution is to go from one account to multiple accounts. That’s the way the world works right now, where every person and company has their own ledger. But the problem with the current trading model is that all the books are private. You can’t go through any company’s books without permission.

  • One Shared Public Ledger: A single shared ledger. The pattern of digital currencies such as Bitcoin, including Hyper Ledger technology, is this model
  • Private ledgers: Multiple private ledgers, existing mainstream transaction mode
  • 1. Linked public ledgers: Public ledgers linked to each other

The idea behind Linked Public Ledgers is to change existing ledgers from private to public. The link between books is a contract. The simplest model, for example, is a gift of assets


By comparing the records on account A with those on account B, we know that account A lost 100 RMB and account B increased 100 RMB. But how do you guarantee that B won’t falsify A’s gift record? This depends on A’s private key signature. Each account signs all its blocks with a private key. The latter block refers to the previous block to form the chain.

However, gift is not A common contract mode, because it requires mutual trust between A and B. B receives the gift and trusts A not to scrap the block and sign A new one. It’s like, A gives you an IOU, and B is afraid to take it. Because do not know A iOU will not be in the future. So the solution is for A to give B A person’s currency, where RMB is an IOU issued by A third party that both A and B trust.

So the solution is to introduce a third account to escrow transactions.


At the moment when A has confirmed and B has confirmed, the contract will come into effect. A’s account is reduced by 101, B’s account is increased by 99, and C’s account is increased by 2. The difference is that B doesn’t have to worry about A tampering with its books. Because the books of A and B are linked to the books of C. For the books of A and B to be valid (confirmed by others), the corresponding records of A and B need to be checked on the books of C. In other words, when someone wants to know if THEY have 99 dollars in B’s account, they can’t just look at B and say they got that much money. We need to check the contract, the complete record in the books of account C. And go to account A for A review.

This practice of using multiple public ledgers is analogous to a database

  • Single shared public ledger: equivalent to ETCD/ZooKeeper
  • Linked public ledgers: Equivalent to Spanner/Cockroachdb/TiDB, they use multiple raft log chains to represent multi-key data and percolator’s transaction model to ensure consistency between multiple keys

But how do you guarantee that A and B won’t be fooled by C? This is the same thing that PoW and PoS do for forks. Look at the length of the chain. If C, after confirming receipt of A and B, adds many more blocks, which in turn link to other “influential accounts”, the record can be assumed not to have been tampered with. Another guarantee is that A and B will save the blocks they see signed by C. Because these blocks are checked out by C with its own private key. If C reneges, A and B can broadcast C’s renege throughout the network. Since the private key can verify the authenticity of these blocks, other nodes on the network will not trust C to mediate the transaction in the future. So as to prevent C from cheating.

But this model raises two of the same problems as bitcoin:

  • Anonymity: If all the books are public, how can personal privacy and trade secrets be guaranteed?
  • Deflationary economy: If you need “accounts of influence” to maintain credibility, you need something like the Genesis Block to mint coins. Once coins are created in the virtual world, there will be a price problem with goods in the real world.

Now how do we solve these two problems

anonymity


The problem with the anonymity of open books comes from the fact that a person or organization’s transactions originate from a single account. By looking at the history of this account, one can infer the relationship between this account and other accounts. Business partners, relatives and friends. The classic solution is to have one physical entity corresponding to multiple virtual accounts.


But the problem with this model is how the balances of two accounts controlled by one person can be transferred to each other. If the two accounts are pouring money into each other, the relationship between them can be inferred.

The problem is the same as traditional money laundering. Middlemen need to be brought in to hide the relationships between accounts.


With the intermediary account changing hands, the relationship between accounts 1 and 2 becomes untraceable amid the flood of transactions in the intermediary account. But how do you guarantee that account C will transfer the money to account 2 as promised? It depends on the reputation of account C. How can account C guarantee its reputation? So this is the open book that the middle account C has in the system, and if the open book is very active, it means that everyone trusts the middle account C. Meanwhile, the “off-site signing” contract (the activity clause in the middle of 12:30~12:32) between the intermediary account AND C is also signed with C’s private key. This private key is the same in the field and the field, so it can be confirmed that it is signed by THE identity of C. So if account C in the middle doesn’t perform. This person can use accounts 1 and 2 to broadcast this private contract all over the web. Through the open and verifiable books, it is known that intermediary account C is not performing its obligations. Through C’s signature, it can verify that accounts 1 and 2 are not lying, so as to deter intermediate account C from refusing to perform the contract. To avoid the risk of a single large transfer. A person can transfer a large amount of money between accounts through multiple such intermediaries.

Deflationary economy

The problem with digital money is that minting is a fixed amount. This is not necessarily a bad thing, as it avoids an arbitrary inflation tax. But in the real world of constant inflation, there is bound to be a price problem. Rising exchange rates, or wildly fluctuating exchange rates, are not conducive to booming trading.

The ultimate solution to this problem, of course, would be for the whole world to use a single currency, with no exchange problems. Or they don’t expect to be traded and simply exist as digital gold. If you want to take over the network of transactions, the most realistic way is to “give up the right to mint.”

That is, the liquidity of the whole system is injected from the outside. By opening an account in the virtual world with an entity with credibility in the real world and endorsing it with credibility in the real world, the virtual world is directly injected with new currency. That is to say, the transaction network is only an account, and each account has sub-accounts in multiple currencies, such as RMB account and USD account, etc., and all contract terms also indicate currency and delivery time clauses, etc. In this respect, it is the same as Hyperledger. Network of transactions, not invent money.

conclusion

Finally, linked Public Ledgers wanted to undertake a network of transactions, doing things like hyperledeger. But instead of a single shared ledger model, it’s a multi-ledger model. This model can have higher transaction speed, no single point, can scale out large network scale, and can guarantee privacy.