The Origins of Blockchain Security

Often in discussions of blockchain security strong focus on cryptographic techniques overshadows a more fundamental analysis.

An important fact to realize when considering the origins of blockchain security is that all incentive is ultimately derived from utility. this may not immediately be obvious however something that most engineers in the space do understand.

If we first consider that a consensus can be generalized as a game built using cryptographic primitives to enable collateralized attestation then we can understand any type of consensus within this framework. To put it clearly, both the hashing hardware and a Proof of Work based consensus and the stake in a Proof of Stake based consensus can be understood as being a form of collateral. Those nodes which act within the rules of the consensus are rewarded for their collateral and behavior whereas those nodes which act against the consensus are penalized. That penalty is levied in the form of wasted electricity and capital in PoW or in the form of slashing is PoS. This punitive mechanism is critical to the design of a consensus which is why all steak-based consensuses must have a slashing mechanism for more information vitalics writings on what's known as the nothing at stake problem cab be found.

With this framework in our minds we can now consider that nodes must be incentivized to deploy their collateral. this is a purely economic consideration and we can see that it is impossible to achieve decentralized consensus without incentive for this collateral to be deployed. Further this incentive must be some form of payment to the nodes. this can come in two forms either a fee can be paid by the user when a transaction is included or an inflationary mechanism can be used to extract value from the token holders. In either case a fee must be born by the users. is there for reasonable to conclude that the users would only accept such a fee in exchange for some utility. this is actually quite well understood as the increased perception of the security of Bitcoin causes it to highest price this higher price incentivizes further deployment of difficulty solving collateral which in turn makes the chain more secure. the reason that users are willing to suffer an inflationary degradation is because of the perceived utility of holding the token. we can thereby understand that it is ultimately the perceived utility of the blockchain network which underpins it's security.

Because high throughput is also a form of utility it is thereby reasonable to conclude that a higher throughput chain could in theory also be more secure however there is an understanding currently within the blockchain industry that the exact opposite is true. The reason for this will be discussed in the next section.