Litheum's Web3 Vision

The Litheum team believes the scalability problem can be solved in a more fundamental way. The Blockchain Trilemma is only applicable to chains which have only incentivized (and thereby decentralized) a subset of their functionality. These chains rely on volunteers to provide those un-incentivized functions of the network, which is why they can't scale safely.

The Litheum consensus, which we call Proof of Performance, is truly decentralized. This means that the Litheum consensus pays for all the things a blockchain needs to do, including synchronizing wallets, sharing transactions, and peer discovery. Because it is fully decentralized Litheum is able to scale without an issue, even becoming more secure as usage grows.

Micro-Finance and DeFAI

The Litheum team believes that the original vision of Blockchain Technology has been forgotten as we've slowly accepted that the technology cannot scale.

A peer-to-peer system enabled by on-chain scaling will unlock sovereignty, fungibility, privacy, and permissionless innovation in a way which has never been seen before.

Alongside the "traditional" blockchain defi apps including lending protocols, DEX trading, and liquidity pools, Litheum is pioneering a new paradigm focused on microtransactions that can process amounts as small as $0.1 with negligible fees. This represents a fundamental shift from current systems where high gas fees on networks like Ethereum make small transactions impractical.

By optimizing for micro-scale financial operations, Litheum enables novel use cases such as per-second yield generation, micro-lending for everyday purchases (like buying coffee with wrapped BTC or ETH), and rapid sub-$100 USDC transactions with leverage. These capabilities create new opportunities for financial inclusion and efficiency that weren't previously possible due to transaction cost barriers.

The platform's integration with traditional finance (Trad-Fi) through partnerships with institutions like SWIFT, combined with its focus on serving unbanked populations and small-scale farmers, demonstrates how microtransaction capabilities can bridge the gap between conventional banking and blockchain technology. This convergence is further enhanced by Litheum's AI-enabled DeFi layer, which allows for custom protocol solutions that cater to traditional business models while maintaining the benefits of decentralized systems. By making these services accessible at a micro scale, Litheum is working to fulfill blockchain's original promise of creating a truly inclusive, efficient, and permissionless financial system.

Global Scale

An ideal scaling solution would be one in which 10,000 miners were able to provide similar performance to modern Networks Applications (backbone IP switches, DNS root servers, reverse-proxy frontends, etc) at either 1/10,000th the speed or 10,000x the cost while remaining 100% decentralized. This seems like a reasonable expectation but current technology misses this mark by many orders of magnitude.

Bitcoin Miners deploy billions of dollars of infrastructure every year. Bitmain's IPO filings showed revenue of $2.3B between 2016-2018 and public statements have claimed over $5B of revenue in 2021. However, Bitcoin can only process 300M transactions per year. It takes at least $10 of infrastructure, maybe even $100, to deliver just 1 transaction per year.

Ethereum miners spent $15B on GPUs during the 2019-2022 bull market. With Ethereum rarely going above 1.2M transactions per day, this alone is $34 for 1 transaction per year. Currently there is over $50B of staked Ethereum. If we account for electricity, bandwidth, CPUs, harddrives, and other things, again, it would not be surprising if the total capital deployed was over $100 for 1 transaction per year.

It should be possible to have a blockchain that is 100k times more powerful than Bitcoin for the same infrastructure costs.

True Decentralization

Current consensus designs do not decentralize all the functions (Remote Procedure Calls/RPCs) which a blockchain needs.

For example, most blockchains do not provide a way for wallets to read from the chain, which is obviously critical. A wallet cannot make a transaction without first reading data from the chain and a user must be able to read data during every use-case. There are many other critical functions like this which are typically not paid for by the blockchain itself.

At Litheum we recognize that a Blockchain is a Network Application, not only a database or a chain of blocks. There are many functions which must be provided, because Litheum provides them all in a decentralized way, it is the only truly decentralized blockchain. All other blockchain which we're aware of require some amount of volunteerism. True Decentralization means that the network will not rely on any volunteerism or dubiously-motivated 3rd parties to provide any critical functionality.

The Danger of Un-incentivized Functions

When Infura went down on November 11, 2020, it took down the entire Ethereum ecosystem. Infura is an RPC provider that supports the Ethereum ecosystem. ConsenSys, which owns both Infura and Metamask, provides these services for free to Metamask users. Ethereum's so-called "DApps" rely on the services of a centralized service provider.

Infura claims to be "serving over 6 billion API requests per day and transferring roughly 1.6 petabytes of data per month". These RPCs are necessary components of the blockchain that Ethereum's consensus does not pay for.

Of course, a user can configure Metamask to point to their own server, or some other server, which is true, but this shows us why these RPCs stand in the way of scale. Either a user must pay for a 3rd party to run their server or they must run their own. In either case, the DApp developer is burdened with a cost that can't easily be passed to the users in a decentralized way.

"If every single DApp in the world is pointed to Infura, and we decided to turn that off, then we could, and the DApps would stop working. That's the concern and that's a valid concern."

"[We're] effectively supporting the entire Ethereum DApp ecosystem with the RPC traffic."

"Any DApp that uses Metamask also inherently depends on Infura (knowingly, or not). In that sense, nearly all DApps potentially depend on Infura."

"We didn't create the problem, we are just a Band-Aid on the problem. We are just providing a solution that is needed."

– Infura co-founder Michael Wuehler via CoinDesk

This effectively invalidates the value-proposition of decentralization.

"If we don't stop relying on Infura, the vision of Ethereum failed."

– Afri Schoedon, release manager for the Parity Ethereum client

No Blockchain we're aware of has solved this problem or discussed it in a simple or fundamental way.

This is why also Bitcoins blocks must remain so small. With small blocks, these problems are marginal enough that they go unnoticed or can be provided by volunteers.

Scale + Decentralization Synergy

Supporting Web3 scale on a platform that is not truly decentralized is simply impossible. To support global scale Web3 the cost of the unincentivized RPCs would be massive. Under typical consensus rules, any miner providing unincentivized functions is at a disadvantage from extra costs. This is the origin of the Trilemma.

However, when a chain is truly decentralized, the exact opposite is true. Ultimately the chain with the most fees can be the most secure. More fees means the nodes will be willing to post more collateral. More collateral means a more difficult 51% attack.

More fees = more security

Because volunteers are not needed, i.e. miners do not need to volunteer to provide any extra RPCs not related to block production, there is no danger from scaling. Litheum can scale because it's truly decentralized!

Proof of Performance Details

True Decentralization = Global Scale

Other blockchains only incentivize a subset of the functionality needed. Typically, there is no incentivization for transaction propagation, block propagation, peer discovery, longest chain synchronization, or even wallet synchronization.

Small blocks vs big blocks

The cost of these functions would grow if we made the blocks bigger, overburdening the volunteers who are funding these operations. Since volunteers need to provide these functions to maintain decentralization, these costs must be limited.

The usual solution to the danger of large unincentivized costs is to simply limit those costs. This is why typical Blockchain consensus designs set a maximum block size.

Global Scale via True Decentralization

On Litheum all RPC responses include a signature. By using these signatures Litheum can measure a node's participation in block production.

Litheum applies two techniques, input-incentivization and lucky-hash incentivization, to all the RPCs, eliminating all unincentivized costs from the blockchain.

Once unincentivized costs are removed, scale can grow freely bound only by the real costs of supply, i.e. the costs to aggregate, validate, verify, and propagate transactions.

Useful Work/Difficulty

All consensus designs require that a node doing out-of-consensus work be penalized, this is what we call the Difficulty. But difficult hashing is only added to the network to create an artificial Difficulty, it serves no other purpose, it does not provide any value to the user directly.

The real "work" that users want done by the network is the aggregation, validation, and propagation of transactions. Litheum simply uses this work, all the things a blockchain does, and uses that as the Difficulty in the consensus. This incentivizes Litheum Runners to deploy bandwidth, computation, and memory.

Litheum TPS

Litheum's throughput, transactions per second (TPS), is dynamic and computed algorithmically as part of the consensus by measuring supply and demand.

The fee paid by the user for a transaction is recalculated by the system as supply and demand changes, it is measured in LTH, we call this the Gas Price.

Additionally, Litheum blocks must contain some minimum total fees which we call the Block Fee. Litheum's Difficulty Adjustment Algorithm targets a block time of 10 seconds, the minimum Block Fee is decreased or increased if a block is produced faster or slower than the target time.

Proof of Performance measures the supply and demand for transactions and balances the Block Fee and Gas Price algorithmically. This determines the TPS of Litheum which is ultimately determined by real physical constraints (the cost of hardware) and the real demand of users.

Unlike other chains which claim to scale without addressing the fundamentals, Litheum allows market dynamics to determine how much a transaction should cost and how much hardware should be deployed in service of TPS.

The Block Fee and the Fee Price are adjusted algorithmically and together determine Litheum's throughput.

More details on this can be found in the whitepaper.

Litheum Nodes (Runners) Details

There are 3 type of nodes which participate in building Litheum's consensus: Block Runners, Transaction Runners, and Data Runners. Additionally, all wallets act as Lucky Hashers, which will be discussed below.

We call the mechanism used by Block Runners and Transaction Runners Input-Incentivization because the RPCs ultimately will produce some input to the chain, i.e. transactions.

Input-Incentivized RPCs

In cases where the data being read from the Blockchain is later used as an input, the data being read can simply be signed and the provider can later be rewarded. We call these "Input-Incentivized RPCs".

This mechanism incentivizes Transaction propagation, Block propagation, and Wallet synchronization.

Transaction Runners collect transactions from wallets and compile them into Miniblocks which are then sent to Block Runners. Both Blocks and Miniblocks are signed by their sender.

Transaction Running helps the network propagate blocks by requiring that any Runner which wants to serve wallets needs to be synchronized to the latest block.

Transaction Running also improves Litheum's efficiency and allows the network to be more flexible. Some nodes will have different firewall policies or serve different subsets of the users.

Lucky-Hash-Incentivized RPCs

In cases where the data is only read, but never used as an input in a transaction, a lottery-like mechanism is used to create incentives. We call this the Lucky-Hash mechanism.

Every wallet holding some LTH is a Lucky Hasher. Lucky Hashers are given chances to find a Lucky Hash each block. More LTH gives more chances. The Lucky Hash winner reads data from a chosen Data Runner and both are rewarded. The Data Runner is chosen fairly and randomly using onchain data.

The Lucky Hash and the data from the Data Runner are submitted in a special transaction to collect the rewards.

The Lucky Hasher has 1 week to collect the data from the Data Runner and submit it after a Lucky Hash has been found.

RPC Incentivization Summary

In a Proof-of-Work consensus the block producer wants to share a new block and other miners want to receive it, so these RPCs are incentivized indirectly. But note also that other miners beside the block producer do not want to share it.

Smart Contracts

The appeal of an in-chain VM is undeniable. The EVM has become the de-facto standard for smart contracts in the Blockchain space and Litheum will integrate the EVM.

However, the EVM requires permanent storage, the costs of which must be handled properly.

On Litheum LTH must be staked for each per byte of EVM storage. LTH will be locked when EVM storage is used. When the data is removed, the associated LTH will be unlocked.

The LTH-per-byte rate will be set, bounding the storage capabilities required for a Runner. The rate decreases smoothly over time and can be reviewed periodically by the Foundation.

Since only 100% of the available LTH could ever be staked, this gives a predictable upper bound on storage requirements for Runners. Note that the price of LTH does not affect the amount of storage available.

This not only solves the EVM permanent storage problem but also serves as a commodity-like-base for the value of LTH, which may appeal to some.

Staking

All runners must stake LTH for punitive purposes. An important distinction from typical Proof-of-Stake systems is that stake is not used as a means of selecting who participates in consensus. Stake only enables the ability to participate as long as the minimum is met. Its use is purely for punitive purposes. Prioritization of block production is based upon the ability of those participants to make a valid block most quickly.

Hardening Security with Inflation

more utility = more fees = more running = more security

Not only those creating transactions are getting some value from the blockchain, holders are also using the chain in a way.

The Litheum team believes it is fair to collect some kind of fee from holders to help pay the Runners who secure the chain. An inflationary mechanism offers a simple and fair way of collecting a sort of fee from the holders.

To accomplish this, every Lucky Hash Transaction comes with some extra LTH. The extra fee can only enter the system by being included into the block's fees and distributed to the other Runners participating in building consensus. Litheum will target 0.5% inflation per year, which we feel is a fair cost of securing an asset.

Governance

Litheum Labs is committed to establishing a sustainable governance mechanism before the launch of the Mainnet, with the ultimate goal of removing the founders and the Litheum Labs team from control of the project and placing control into the hands of the community.

To achieve this aspect of True Decentralization, Litheum Labs is exploring routes through which to establish a fully on-chain governance mechanism for Litheum. This would mean the full automation of all aspects of the Litheum decision-making process, from a proposal being conceived by the community to the deployment of the proposal.

Litheum Labs is working to develop solutions for the challenges associated with a fully on-chain decision-making process. For example, it is crucial that code proposals are reviewed for security flaws by trusted third parties before implementation. To address this challenge, we are developing mechanisms for allowing trusted auditors to receive compensation through a fully on-chain process while remaining responsible for any mistakes they make.

As we transition to a fully on-chain governance, we will also establish a non-profit foundation to execute the decisions of the community. The Foundation's constitution will prioritize the goal of moving the governance of Litheum entirely to on-chain and truly decentralized mechanisms.

Layer 2

The Litheum team envisions that layer 2 infrastructure such as storage and low-latency transactions will be part of the ultimate Web3 ecosystem. The PoP consensus can easily be tuned to offer these things and much more.

Conclusion

The Litheum team envisions everyone in the world having affordable access to decentralized Financial Freedom.

We believe that privacy and freedom delivered by Truly Decentralized technology can make the world a better place, that True Decentralization is simple and understandable, and that True Decentralization guarantees the ability for everyone access to decentralized technology.

We are committed to make sure that Litheum will enable massive scalability while remaining Reliable, Safe, Secure, and Trustable.

But we can't do any of this without you. Web3 will be a technological disruption, and we believe we have the best solution to the scaling problem. But Litheum is nothing without the community and the support of the people who believe in our vision who will help spread our message and our vision to every corner of the world.