Proof of Hardware is a new concept Aitivity has been working on to solve major issues in current implementations of blockchain and current proof of work paradigms.
It does not change the global behavior of the blockchain and can be integrate in any existing blockchain replacing proof of work and keeping the applications on top of the blockchain running without modification.
As blockchain technologies is becoming more mature, and rise to a global scale, some major issues limit its usage and growth, mainly because of how proof of work exists at its current state.
Proof of work is the actual solution used by most of the blockchains.
Proof of work requires a huge amount of processing power to divide the work between the community. As it is built, new blocks are added to the blockchain statistically divided by the amount of work done by each miner.
Being chosen to add a new block gives you revenue, so there is a constant competition between miners to have the most processing power used to mine new block to get more revenue.
Bitcoin mining only is estimated to consume around 50TWh yearly, the equivalent of the electricity consumption of a country like Singapore, or 0,21% of the world electricity consumption. Last studies publish in Nature show that it could raise the earth temperature by 2°C in 30 years.
Bitcoin mining rewards is estimated as $2.5B/year, 90% of it going to mining cost (Electricity + Machine). This means that more than around $2.2B of bitcoin is converted to other forms of currency to pay for mining expenses. In order to keep the same market value, $2.2B needs to then be invested/converted in bitcoin. This partially accounts for the drop in Bitcoin value in 2018.
Bitcoin is scheduled to build a new block with a target time of 10 minutes, as the consensus needs to propagate between each node. Time to validate a transaction is between 10 minutes to 1 day, creating complications for solutions needing instant payments.
As consensus is obtained by the majority, if someone controls more than 50% of the processing power, that person can add fake transactions to the blockchain, effectively destroying trust in the whole system. Usually it requires 1 hour to one day to make sure the fake transaction is validated. As now it is easy to rent processing power, many smaller blockchains have already been successfully attacked, costing millions of dollars. It’s plausible that it may happen to Bitcoin in the future.
With proof of hardware, using a secure element, we can make sure that the algorithm and certification of the data is done by the designed hardware so we can distribute governance of the blockchain between hardware devices without the need of competition.
Energy consumption is negligible compared to proof of work. Devices used can consume as low as 0.5w/h, meaning 100 000 devices will consume 0.5Gw/h, or 1/100 000 of current bitcoin consumption.
Electricity consumed by one device costs less than 1$/year, the cost of purchasing a device is estimated to be under 50$. Even for the first year if 100 000 devices are bought, “mining” coast will be around 5.1M$, 1/50 of bitcoin cost.
As the next device that will create block is known, maximum transaction time can be minimized and be under a minute, enabling instant payments.
To control 51% of the network, an attacker needs to take control of 51% of the physical devices. Rules can be made around the purchase of devices and once the network is large enough, this sort of attack is not probable to happen. Furthermore, devices can be banned from the network, so any hostile attempt to control the network or suspect behavior can be avoided before it happens.
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