Network security is the foundation to any financial system. Agreement on transactions and account balances, also known as consensus, is vital to confidence in the currency and can be measured by both longevity and analysis of its resistance to various attack vectors.
In peer-to-peer financial systems, Proof-of-Work (PoW) solved the double spending problem. It has proved its worth for more than a decade, but is energy intensive and susceptible to majority attacks. Proof-of-Stake (PoS) was developed to avoid those issues through alignment of interests, but it came with its own shortcomings, most notably the nothing-at-stake problem.
Decred’s Hybrid Solution
Decred employs a combination of PoW and PoS to yield the best of both systems, mitigate their weaknesses, and deliver a layered consensus mechanism that makes it far more secure than other cryptocurrencies. Decred uses conventional PoW with a BLAKE-256 hash algorithm, and it is mined exclusively by ASICs. Decred holders time-lock their funds to purchase tickets in a lottery. Those tickets are added to a pool of roughly 41,000 tickets, and five tickets are pseudorandomly selected to validate the Proof-of-Work for the previous block. If at least 50% of the tickets approve the work of the miner, the miner’s reward is approved and the block is added to the blockchain.
Resistance to Attacks
Because a block must include 3 or more ticket votes to be valid, blocks must be broadcast on the network as they are mined for the chain to proceed, so miners cannot mine in secret. The result is that an attacker must have a considerable combination of hashpower and stake to successfully execute a majority attack. Decred voters are also set to reject a re-org of greater than 6 blocks, so any attack involving a deep re-org is unlikely to be accepted by the network. When comparing the cost of an attack on Decred to that of a pure PoW cryptocurrency, the cost to attack Decred is an order of magnitude greater, plus any attacker with stake would be taking actions counter to their interests.
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