MIT researchers have developed a new encryption that drastically reduces the amount of data users need to participate in the network and verify transactions — by up to 99% compared to today’s popular cryptocurrencies. That means a much more scalable network.
Cryptocurrencies, such as the popular Bitcoin, are networks built on a blockchain, which is a series of individual blocks, each containing transaction data. These networks are decentralized, meaning there are no banks or organizations to manage funds and balances, so users join forces to store and verify transactions.
But decentralization leads to a scaling problem. To participate in a cryptocurrency, new users must download and store all the transaction data from hundreds of thousands of individual blocks. They must also store that data to use the service and help verify transactions. This makes the process slow or computationally infeasible for some.
In a paper to be presented at the Network & Distributed System Security Symposium next month, MIT researchers introduce Vault, a cryptography that allows users to join the network by downloading only a fraction of the total transaction data. It also incorporates techniques that delete empty accounts that take up space and allow verifications using only the most recent transaction data that is split and shared across the network, minimizing the data storage and processing requirements of an individual user.
In experiments, Vault reduced the bandwidth to connect to its network by 99 percent compared to Bitcoin and 90 percent compared to Ethereum, which is considered one of the most efficient cryptocurrency systems today. Importantly, Vault ensures that all nodes validate all transactions, providing security equal to existing systems.
“Currently, there are many cryptosystems, but they encounter obstacles related to joining the system as a new user and storage. The broader goal is to enable the scaling of cryptocurrencies for more and more users,” says Derek Leung, a graduate student in the Computer Science and Artificial Intelligence Laboratory (CSAIL).
New users join crypto networks, or “bootstrap,” by downloading all the data from previous transactions to ensure it is secure and up-to-date. Last year, to join Bitcoin, for example, a user would download 500,000 blocks worth a total of about 150 gigabytes. Users also need to store all account balances to help verify new users and ensure that users have enough money to complete transactions. Storage requirements are very important as Bitcoin expands beyond 22 million accounts.
The researchers built their system on a new cryptographic network called Algorand – invented by Silvio Micali, Ford’s professor of engineering at MIT – that is secure, decentralized and more scalable than other cryptocurrencies.
With traditional cryptocurrencies, users compete to solve equations that validate blocks, with the first to solve the equations receiving funds. As the network scales, this slows down transaction processing times. Algorand uses a “proof-of-stake” concept to more efficiently verify blocks and better engage new users. For each block, a representative “committee” of verifiers is selected. Users with the most money – or stake – in the network have a higher probability of being selected. To participate in the network, users verify each certificate, not each transaction.
To reduce data storage requirements, the researchers designed Vault with a novel “sharding” scheme. The technique divides transaction data into smaller chunks that are shared across the network, so that individual users only need to process small amounts of data to verify transactions.
