The goal is to have an opportunity cost to breaking the rules.
Proof of Burn is a real cost for following the rules.
On 12/10/2014 01:35 AM, Tamas Blummer wrote:
> We spend scarce resources external to the digital realm to create Bitcoin.
> Real world sacrifice is needed to avoid “nothing at stake” and sybil
> attacks. With Bitcoin we now have a scarce resource within the digital realm,
> so it appeals my intuition to re-use it for sacrifice instead of linking
> again an external, real world resource.
>
> In following I outline a new mining algorithm for side chains, that burn
> Bitcoins to secure them.
>
> The side chain block validity rules would require that a transaction on the
> Bitcoin block chain provably destroys Bitcoins with an OP_RET output, that
> contains the hash of the block header of the side chain. To also introduce a
> lottery, the burn transaction’s hash is required to satisfy some function of
> the block hash it was included in on the Bitcoin block chain. For example
> modulo m of the burn transaction hash must match modulo m of the block hash,
> that is not known in advance.
>
> Those who want to mine the side chain will assemble side chain block
> candidates that comply the rules of the side chain, then a Bitcoin
> transaction burning to the hash of the block candidate and submit it to the
> Bitcoin network. Should he burn transaction be included into the Bitcoin
> block chain and the Bitcoin block’s hash satisfy the lottery criteria, then
> the block candidate can be submitted to extend the side chain.
>
> A side chain block header sequence would be accepted as side chain trunk if a
> sequence of Bitcoin SPV proofs for burn transactions prove, that linked
> blocks have the highest cumulative burn, if compared to alternative
> sequences.
>
> The Bitcoin miner will include burn transactions because they offer Bitcoin
> fees. Bitcoin miner can not selectively block side chains since the hashes
> associated with the burn do not disclose which side chain or other project
> they are for. Here you have a “merged mining” that does not need Bitcoin
> miner support or even consent.
>
> Mining difficulty of the side chain could be adjusted by stepping up the
> required burn and/or hardening the criteria that links a burn proof
> transaction with the bitcoin block hash it is included in.
>
> The difficulty to mine with burn would be dynamic and would also imply a
> floating exchange rate between Bitcoin and the side coin.
>
> Tamas Blummer
> Bits of Proof
>
> 00000000000000001172380e63346e3e915b52fcbae838ba958948ac9aa85edd
>
>
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