Documents Associated with Bitcoin and Related Topics in Law: Part XIII

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This article first appeared on Dr. Craig Wrights blog, and we have republished with permission from the author. Read part 1, part 2, part 3, part 4, part 5, part 6, part 7, part 8, part 9, part 10, part 11 and part 12.

Simplified Payment Verification (SPV) was first discussed in the Bitcoin white paper (Wright, 2008) and has been taken up by other authors, such as Palai et al. (2018). These authors present a method they call block synthesis. Yet the authors maintain an underlying premise: that all parties must perform validation of all transactions in a blockchain. For example, in proposing a solution, Palai et al. (2018, p. 3) note that the inability of lightweight nodes to validate transactions is due to the lack of access to the full blockchain. Nevertheless, the underlying assumption that all users of the system must validate all transactions is still part of the underlying premise of the argument.

Nadia et al. (2018) take a similar approach to that of Palai et al. (2018), examining the methodologies associated with the compression and synthesis of a blockchain distribution. In this analysis, the authors briefly mention SPV, but only in relation to an alternative process called VerSum, which outsources block analysis to third parties. Similarly, as for Palai et al. (2018), Nadiya et al. (2018) assume that all nodes must validate all transactions. Such an assumption erroneously incorporates the notion that all systems globally must validate all other systems to maintain security and honesty in a financial network.

Ozyilmaz et al. (2018) again follow the definition of full nodes, light nodes, half nodes and other systems that do not participate in the consensus process under the definition of a blockchain node as system nodes. This allows them to refer to the SPV as a weak system, where they argue that a lower level of security is maintained. In this, the authors fall into the common trap of believing that nodes that do not create blocks can somehow be part of a blockchain’s consensus methodology.

Annotated Bibliography

Palai, A., Vora, M. and Shah, A. (2018). Empowering Light Nodes in Blockchains with Block Summarization.2018 9th IFIP International Conference on New Technologies, Mobility and Security (NTMS), 15.https://doi.org/10.1109/NTMS.2018.8328735

Palai et al. (2018) note that all blockchains owe an origin to Bitcoin. This leads to the discussion about scalability. The authors face the description and understanding of scalability as it applies to a blockchain in the article on the BTC Core Wiki (Scalability Bitcoin Wiki, nd). The Wiki page erroneously claims that Bitcoin has a scaling limit of around seven transactions per second without noting the artificial limitation imposed by the BTC Core development team.

The authors rely on a definition of nodes representing any user of the system. In this analysis, they present a light node and represent it as a component of the consensus process within a blockchain system such as Bitcoin. Unfortunately, the false definition of a node leads to the development of a block summarization process that the authors consider novel, while ignoring the Bitcoin whitepaper section documenting pruning. The analysis extends into the development of a recursive tree designed to summarize the transactions.

The development involves reducing the size of a global block distributed over a blockchain network. Yet the tradeoff is based on increased compute rates that limit the ability to scale at high volume. While the authors document a 50% reduction in block size, the authors do not report on the increased computation time and therefore processing time associated with parsing and accepting block transactions . Such a limitation is associated with the authors’ alignment on promoting a decentralization agenda rather than transaction volume. The development of compression algorithms allows for smaller blocks, but the expense the authors don’t cover is the necessary increase in processing power.

Ozyilmaz, KR, Patel, H. & Malik, A. (2018). Split-Scale: Scaling Bitcoin by Partitioning the UTXO Space.2018 IEEE 9th International Conference on Software Engineering and Service Science (ICSESS), 4145.https://doi.org/10.1109/ICSESS.2018.8663851

Ozyilmaz et al. (2018) propose a sharded approach to validate industry auction blocks and a distributed mempool process to store unconfirmed transactions. The approach is to divide a blockchain into several subchains to allow a distributed set of home nodes to operate (2018, p. 2) even if it does not participate in the consensus process with the main nodes of the system. Such an approach divides the blockchain into several segments.

The system leads to the creation of derivative coins which the authors call nuruBitcoins. Although this approach increases the number of nodes, splitting tokens across multiple chains removes the functional ability of the tokens, as some chains may be considered more or less secure than others. Moreover, such a sub-chain would require additional layers of interaction, to allow users to exchange assets. In part, this approach ignores the pseudonymous nature of Bitcoin, but promotes anonymity. Unfortunately, the process is based on several faulty premises and is not technically feasible.

Nadiya, U., Mutijarsa, K., & Rizqi, CY (2018). Summary and Block Compression in the Bitcoin Blockchain. 2018 International Symposium on Electronics and Smart Devices (ISESD), 14.https://doi.org/10.1109/ISESD.2018.8605487

Nadia et al. (2018) circumvent the pruning and computational costs associated with compression and decompression to provide an alternative methodology designed to reduce block sizes within the Bitcoin network and other blockchains. The methodology presented again saves storage space at the expense of computation time. Yet, by limiting block size as promoted by BTC Core and Ethereum, such a strategy offers limited storage savings coupled with increased compute expenditure.

The proposed solution incorporates the introduction of a compression and deflation algorithm. The authors rate SPV, but rule it out from alternative strategies such as VerSum. In this approach, the authors have an undisclosed goal of achieving widespread decentralization and do not look at the cost of applying compression algorithms on large-scale networks. Although the experimental results show compression, the authors do not report the time used to compress the blockchain, which makes the research much less valuable.

Additional references

Nadiya, U., Mutijarsa, K., & Rizqi, CY (2018). Block Summarization and Compression in Bitcoin Blockchain.2018 International Symposium on Electronics and Smart Devices (ISESD), 14. https://doi.org/10.1109/ISESD.2018.8605487Ozyilmaz, KR, Patel, H., & Malik, A. ( 2018). Split-Scale: Scaling Bitcoin by Partitioning the UTXO Space.2018 IEEE 9th International Conference on Software Engineering and Service Science (ICSESS), 4145. https://doi.org/10.1109/ICSESS.2018.8663851Palai, A., Vora, M ., & Shah, A. (2018). Empowering Light Nodes in Blockchains with Block Summarization.2018 9th IFIP International Conference on New Technologies, Mobility and Security (NTMS), 15. https://doi.org/10.1109/NTMS.2018.8328735ScalabilityBitcoin Wiki. (nd). Retrieved December 19, 2022, from https://en.bitcoin.it/wiki/ScalabilityWright, CS (2008). Bitcoin: a peer-to-peer electronic payment system. SSRN electronic journal. https://doi.org/10.2139/ssrn.3440802

This article has been slightly edited for clarity

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