MIS CHAPTER 10 - SECURITY Flashcards Quizlet

Distributed Sub-Networks: Unbounded Distributed Scaling of the Bitcoin Network Without Any Forks

TL;DR
I believe I have discovered a method to scale the Bitcoin network without the need to update the Bitcoin core code. Neither a hard fork nor a soft fork should be necessary. This can be achieved by securely distributing the ownership of a single multisignature Bitcoin wallet. The distributed ownership would be managed by a sub-network using a new blockchain which could provide any functionality its users desire, thus allowing for unlimited scaling and feature adoption. The proof mechanism to enforce the sub-network would not be limited to ASIC-compatible proof of work. Furthermore, any sub-network would be able to make use of innovative current and future blockchain technologies without the need to create a separate token (a.k.a. altcoin). For example, if a network would like to offer smart-contract functionality and code execution (e.g. Ethereum), anonymity (e.g. Monero), or any other utility, then it can enforce all of these protocols with authentic Bitcoin, so as to not dilute the crypto space with the creation of new, “alternative” coins and the value addition of these features can be fully recognized by Bitcoin. This can be achieved by distributing the ownership of a single Bitcoin multisignature wallet existing on the Bitcoin core network. The wallet can be used as a system of account in a scalable sub-network in a manner that guarantees the accounts held in the sub-network are tied directly to coins in the official Bitcoin Core network.
 
Introduction:
There is a clear division in the Bitcoin community regarding the implementation of a network hard fork. It appears the two most prevalent sides of the argument are:
 
If it wishes to grow into something much bigger than it is today, then perhaps the Bitcoin community should come to a consensus in order to move forward and robustly defend against the significant external threats looming over it. These threats include:
 
Definitions:
 
Properties of the sub-chain:
All wallets on the sub-chain include two IDs and one private key. The IDs are: an address for the sub-chain and a corresponding address on the super-chain. Of course the private key will be used to sign transactions on the sub-chain.
 
All nodes on the sub-chain will simultaneously observe the super-chain and the sub-chain.
 
A multisignature wallet will be created on the super-chain with each portion of ownership controlled by a mining node on the sub-chain.
 
The sub-chain will include two different types of blocks. We will refer to the sets containing the different types of blocks as:
 
Blocks_A and Blocks_B will be mined independently from each other on the sub-chain.
 
Blocks_A blocks will contain a header to notify the network they belong to the Blocks_A set, and likewise for Blocks_B blocks.
 
Blocks_A blocks and Blocks_B blocks can be of arbitrary and differing sizes and can be appended to the sub-chain in an arbitrary order.
 
Mining On The Sub-Chain
Proof of Work (or any other proof mechanism) will be applied to Blocks_A blocks independently from Blocks_B blocks.
 
Nodes will earn transaction fees on the sub-chain when they solve a block belonging to Blocks_A.
 
Nodes will earn transaction fees on the sub-chain when they solve a block belonging to Blocks_B.
 
The sub-chain will contain X mining nodes and only N of those nodes, where N < X, (and in this case N = 9) will be able to control one of the private keys of the multi-sig wallet on the super-chain over the period between any two given Blocks_A blocks being solved on the sub-chain.
 
These 9 nodes will be chosen through some sort of consensus mechanism by the X nodes on the sub-chain. This can be determined by hashrate magnitude, largest stake, democratic election by node votes, etc.
 
The nodes that are allowed to be one of the 9 nodes managing the keys of the multisig wallet on the super-chain will be re-evaluated every time a Blocks_A block is solved on the sub-chain and subsequently applied to the super-chain. This will be accomplished by taking all transactions from the Blocks_A block, executing them on the super-chain along with a final transaction containing the entire surplus of the multisig wallet into a new multisig wallet created and controlled by the 9 new nodes chosen by the sub-chain.
 
The obvious risk here is that 5 of the 9 nodes can collude and run away (back to the super-chain) with the full amount of funds accounted for in the sub-chain. This threat should be possible to mitigate in various ways that create a risk for any of the 9 nodes to behave improperly.
 
Security can start by the rest of the network making a best effort to pick reputable nodes during every re-election of the 9. Nodes with an established reputation and the ability to earn transaction fees simply for relaying transactions, should be earning a reward that outweighs the risk of attempting to steal. Lastly, a smart-contract could be executed on the sub-chain that requires the 9 key-holders to stake a relatively significant amount before they are granted 1/9 access to a multisig wallet controlling all of the sub-chain’s funds. If any four or fewer of the 9 key-holders act maliciously while five or more do not, then the honest nodes will gain the stakes of all the malicious actors. This could foster an environment of distrust among the 9 key-holders leading them to worry if thief partners may actually be trying to betray them for financial gain.
 
Note: I believe SegWit will support up to 20-of-20 multisig wallets. It would provide far more security if we use 11-of-20 compared to if we use 5-of-9. In fact, the security of this pattern should scale exponentially as M and N increase.
 
Also worth considering is the use of a larger value of M relative to N such as 6-of-9, 7-of-9,... but if M gets too close to N, it decreases the number of nodes that need to collude to put the multisig wallet funds in a permanent deadlock. Of course there would be no financial benefit to this on the sub-chain or on the super-chain, but external enemies of Bitcoin might be willing to attempt this.
 
Moving Bitcoin Into The Sub-Chain
A user who wishes to move BTC into the sub-chain from the super-chain will first create a wallet on the sub-chain, then notify the sub-chain of an upcoming transaction that he will give to the multisig wallet on the super-chain, then AFTER confirmation on the sub-chain, the user will send funds on the super-chain to the multisig wallet. (The order here is important, so that an eavesdropper does not create the corresponding sub-chain wallet for the true user after the true user has already spent the coins on the super-chain.)
 
Final Points To Note
An issue some members of the Bitcoin community have with increasing block size is that it eventually leads to the exclusion of smaller miners who cannot store the entire blockchain history on their nodes. Sub-networks could possibly be configured to clear themselves out by moving all funds back into the super-chain and then restarting tabula rasa (i.e. with an empty blockchain).
 
A solution to bandwidth constraints of small miners could be introduced without the need for a hard fork on the super-chain if future blockchain developments solve the bandwidth issue.
 
Any number of these sub-chains can be created if various factions of the Bitcoin community want their own custom functionality.
 
This pattern requires super-chain users to trust the sub-chain network before entering it, but requires no trust or cooperation between the sub-chain and super-chain networks. The one attack super-chain miners can inflict on sub-chain transactions coming back to the super-chain is to exclude all transactions involving the multisig wallet. This can be rendered simply as an inconvenience, however, if miners on the sub-chain dual mine on the super-chain and eventually validate a block themselves.
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