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I've written a research paper about a more heavyweight version of this scheme: Nonoutsourceable Scratch-Off Puzzles to Discourage Bitcoin Mining Coalitions ht

I've written a research paper about a more heavyweight version of this scheme: Nonoutsourceable Scratch-Off Puzzles to Discourage Bitcoin Mining Coalitions http://cs.umd.edu/~amiller/nonoutsourceable_full.pdf http://cs.umd.edu/~amiller/nonoutsourceable_full.pdf But the general idea comes across very well in this blog post. The main difference between this post and our "weakly-nonoutsourceable" scheme is that ours uses a custom hash-based signature scheme, which has exactly the properties we require. The SIG scheme in the original post would be hard to instantiate otherwise (ECDSA, for example, totally doesn't work). The "strongly-nonoutsourceable" scheme, which uses zero-knowledge moon-math, is aimed at also discouraging cloud-mining, which is also a serious concern.

pstrateman 12y ago
I'd be interested to hear how you plan on reducing the mining variance with a nonoutsourceable proof of work. Without a scheme to reduce the variance, nonoutsourceable puzzles would almost certainly lead to increased centralization (smaller miners effectively never solve the puzzle without collusion). (I notice you're not calling for an immediate hard fork of bitcoin like Ittay Eyal and Emin Gün Sirer are)
- socrates1024 12y ago
  Yes, it's absolutely essential that a switch to a nonoutsourceable puzzle also comes along with a variance reduction mechanism. I have no clear winning solution for this part, but I've got a few ideas and have discussed them with Peter Todd, who also has ideas here. Basically the approach should be to internalize P2Pool, and to let miners choose a lower difficulty if they want (for a proportionally lower portion of the reward). This is really subtle though. It would increase the amount of bandwidth needed. It would be easier to discourage / punish a block that has less difficulty. Also, some component of the reward should still be a high-variance jackpot... the nonoutsourceable puzzle is only effective when there's a luck component, and thus a big incentive for the real worker to defect. So there's a ton more work to do. It's definitely not time for an immediate hard fork. But the discussion should begin.
- deleted 12y ago
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pstrateman 12y ago

I'd be interested to hear how you plan on reducing the mining variance with a nonoutsourceable proof of work. Without a scheme to reduce the variance, nonoutsourceable puzzles would almost certainly lead to increased centralization (smaller miners effectively never solve the puzzle without collusion). (I notice you're not calling for an immediate hard fork of bitcoin like Ittay Eyal and Emin Gün Sirer are)

socrates1024 12y ago
Yes, it's absolutely essential that a switch to a nonoutsourceable puzzle also comes along with a variance reduction mechanism. I have no clear winning solution for this part, but I've got a few ideas and have discussed them with Peter Todd, who also has ideas here. Basically the approach should be to internalize P2Pool, and to let miners choose a lower difficulty if they want (for a proportionally lower portion of the reward). This is really subtle though. It would increase the amount of bandwidth needed. It would be easier to discourage / punish a block that has less difficulty. Also, some component of the reward should still be a high-variance jackpot... the nonoutsourceable puzzle is only effective when there's a luck component, and thus a big incentive for the real worker to defect. So there's a ton more work to do. It's definitely not time for an immediate hard fork. But the discussion should begin.
deleted 12y ago
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