Node Operator Necessity and Benefits of a Hybrid Approach
By Jacob Holdmann, Director of Token Relations
The consensus layer of the blockchain is the foundational technology that makes a blockchain what it is. It is the means of protecting and storing the data so that it is immutable and transparent. Participants in a blockchain’s consensus layer are known as nodes. Whether it be time and computational power or staking of individual assets, the blockchain would cease to exist without the foundational work of these nodes. The two mainstream consensus mechanisms most used today are Proof of Work (PoW) and Proof of Stake (PoS).
A node is an individual computer that is connected to a blockchain or cryptocurrency network. Through verifying and validating transactions on the chain, the node works to maintain the blockchain ledgers integrity. Nodes help to secure the chain by participating in a consensus algorithm, in this case PoS or PoW. These nodes are all independent entities uncontrolled by a centralized power, allowing for trustless consensus within the blockchain.
A PoW consensus method is the same used by Bitcoin and uses computational power to secure the data stored in the transactions submitted to the blockchain. These PoW node operators are known as miners and receive a coin reward for their part in securing the blockchain. PoW is a tested mechanism that ensures the security that comes with Bitcoin. However, PoW is often criticized for its environmental impact. Additionally, until the chain is long enough, PoW consensus is susceptible to short term attacks aka a 51% attack. This occurs when an individual throws enough computing power at the blockchain to win enough blocks to take over 51% of the network and therefore takes control of the entire chain.
A PoS consensus mechanism has participants lock up or “Stake” some sort of cryptocurrency, to be allowed the right to validate transactions on the chain and receive the transaction fees for doing so. These node operators are called validators, after they lock their stake, they get the opportunity to sign signatures on blocks, verifying that the contents of the transaction are legit. Although PoS lessens the environmental impact of consensus, it leaves the chain open to long term attack. Now the private keys from the past become a vulnerability to the chain itself. If someone can gain access to a past private key, they can start a new chain and begin validating blocks. Since the computational power need is decreased from PoW, a validator can do years’ worth of signatures in a much shorter amount of time. Once that malicious chain has enough blocks to become the longest chain, all new nodes will be brought to the malicious chain followed by all the old nodes. Without PoW as a long-term attack protector, PoS cannot fully protect itself.
PraSaga takes an innovative approach when it comes to our consensus layer. We acknowledged the short comings of both the PoS and PoW algorithms and decided to implement a hybrid PoS/PoW approach. Security is the biggest concern when dealing with an infrastructure capable of handling trillions in economic activity and on chain currencies. We made sure to take the proper steps to ensure that SagaChain is protected in both the short-term and the long-term. The team is currently completing development of the consensus layer and preparing for our testnet. Here, I will go over a very high-level overview of how SagaChain consensus works and the benefits of the approach we are taking.
As stated above, SagaChain incorporates both PoS and PoW consensus algorithms. We are a sharded chain that can produce blocks in parallel. The process starts with validators on the PoS side. Each shard will have a leader, that leader will pick 21 nodes at random to verify and do signatures on incoming transactions. Once the signatures are completed, BFT consensus is reached and the block is produced, it will be sent up to the leader of the shard. The leader then sends that block to the miners completing the PoW to secure the block.
Once the PoW is done and the block is secured, it is shared with the leader and sent back to the validators one more time to validate that the block was secured via PoW. We chose SHA-256 as our encryption type. The PoW step gives us the ability to delete the PoS private keys used during block production stage to ensure they do not get compromised. Once the block is validated the second time by the validators, the leader shares the hash with all the other shards on the network and hash braids the network together. This makes a 51% attack much more difficult because you are forced to take over 51% of the entire network instead of just an individual shard.
These steps were taken to ensure security of the network but also to increase energy efficiency for a PoW system. The goal finality time per block is 15 secs., meaning we will produce 4 blocks per minute per individual shard. When you combine the resources of producing blocks in parallel, it grows drastically. The target number of shards at mainnet is >1,000, meaning SagaChain has the capability of producing a minimum of 4,000 blocks per minute. Comparative to the time it takes to produce 1 bitcoin block, we will have the capability to produce at least 40,000 blocks per individual bitcoin block. Although we cannot decrease the cost of computational power, we have increased the energy efficiency on a per block basis.
Once we reach mainnet, anyone is free to be a node operator. All node operators must stake and validate the transactions. However, all validators can compete in PoW too. All nodes that validate and secure a transaction will split the transaction fee equally. The coin rewards from producing the blocks will be broken down to 30% for the validators and 70% for the miner. The 30% is split between the 21 nodes that completed validation. The miners will then compete for the 70% of the reward in a winner take all scenario.
The architecture of our consensus and using a sharded chain increases the opportunity to win coin rewards from securing blocks on the PoW side. SagaChain will have 128/256 nodes per shard, meaning you are only competing against other miners on your shard rather than the entire mining pool. The increased opportunity means you can run a CPU, GPU, or ASIC machine to compete as a miner on SagaChain.
If you have questions about this article or would like more details about becoming a node operator for SagaChain, please email us at firstname.lastname@example.org.