At Electrical Coin Co. (ECC) we’re exploring a transition in Zcash from the present proof-of-work (PoW) consensus to a proof-of-stake (PoS) consensus. We’re proposing a step on this path that we name the Trailing Finality Layer (TFL). If deployed, this may be mixed with Zcash’s current consensus; the ensuing consensus protocol at that time can be a hybrid of PoW and PoS.
The general objective is to allow finality and PoS on Zcash in a minimally disruptive method. Finality is a assure that after a block is finalized, that block and the transactions it comprises can’t be rolled again. Finality can cut back delays for some use circumstances (similar to centralized alternate deposit wait occasions) and allow new enhancements similar to safer cross-chain bridges.
If the TFL strategy is adopted by the Zcash group, it may allow some new use circumstances, similar to staking ZEC to earn protocol rewards, whereas minimizing disruption to current use circumstances. Mining is an instance of a course of that may be impacted in a hybrid mannequin, as mining rewards can be decreased whereas the remainder of mining infrastructure and processes would stay unchanged.
We additionally purpose to attenuate disruption to evaluation of consensus safety, as most of the current consensus properties stay intact in a hybrid mannequin.
We’ve solely begun to outline the design of this PoW/PoS hybrid protocol. Many key particulars stay open questions, as we increase on under. By sharing our strategy early on this course of, we’re aiming to assemble and incorporate suggestions as we go, discover potential collaborators, and stimulate dialogue about this strategy.
Get entangled
When you’re excited by offering suggestions or collaborating on this undertaking, please get in contact! A great alternative to be taught extra and be a part of the dialog is to attend (in particular person or nearly) the Interactive Design of a Zcash Trailing Finality Layer workshop I’m main at Zcon4. Additionally be happy to e mail me, [email protected], about your curiosity. We’re searching for contributors from a variety of backgrounds, together with technical, product, group, and any Zcash customers who wish to weigh in because the proposal evolves.
PoS transition background
ECC beforehand shared our rationale for why we consider it’s in one of the best curiosity of present and future ZEC customers to transition the protocol to proof of stake within the weblog submit Ought to Zcash transition from Proof of Work to Proof of Stake? and the Zcon3 presentation Motivations of Proof of Stake. In 2022, we revealed a high-level overview of our Proof-of-Stake Analysis strategy, a extra detailed Strategy, Focus, and Subsequent Steps companion submit, and gave a Zcon3 presentation about high-level design challenges in Proof of Stake.
A proof-of-stake transition path
Our imaginative and prescient for a transition to proof of stake contains a minimum of two main milestones:
Transferring Zcash from its present proof-of-work mannequin to a hybrid PoW/PoS system.
Transferring Zcash from a hybrid PoW/PoS system to pure PoS.
Our major motivation for proposing (a minimum of) two steps is to attenuate disruption of usability, security, safety, and the ecosystem throughout every step.
This strategy of transitioning from PoW to hybrid to PoS was executed by Ethereum with the deployment of the Beacon Chain (hybrid) then The Merge (pure PoS).
Design targets for a hybrid PoW/PoS system
ECC is refining the design of TFL with a number of targets in thoughts, and we’ll doubtlessly be including extra as we proceed to develop this proposal. At the moment:
We wish to reduce disruption to current pockets use circumstances and UX. For instance, nothing ought to change within the consumer flows for storing or transferring funds, the format of addresses, and so forth.
We wish to reduce complexity of safety analyses by preserving current evaluation outcomes the place attainable.
We wish to allow new PoS use circumstances that enable cell shielded pockets customers to earn a return on delegated ZEC.
We wish to allow trust-minimized bridges and different advantages by offering a protocol with finality.
We wish to enhance the modularity of the consensus protocol. Modularity has a number of loosely outlined and associated meanings, e.g., it’s attainable to grasp some consensus properties solely given information of a element of the protocol, and it’s attainable to implement consensus guidelines in modular code elements with clear interfaces.
Trailing Finality Layer in a nutshell
The hybrid PoW/PoS protocol we envision at ECC is structured like immediately’s Zcash NU5 protocol with a brand new Trailing Finality Layer. We describe it as a layer, as a result of the present nodes and most of their logic will proceed to function largely as-is with minimal adjustments, whereas a lot of the brand new performance might be supplied by new, supplementary elements and community protocols.
This new layer offers the blockchain with a trailing finality assure: after blocks are mined they are often finalized which means they will not be rolled again. This assure extends to any of the transactions throughout the blocks. It’s trailing as a result of this finality property follows the PoW mining system “trailing behind it.”
As a result of this hybrid design depends totally on PoW for producing new blocks, this protocol is proof against halting in the identical method Bitcoin or present Zcash is — though the finality assure could stall, as we describe subsequent.This design paradigm has each a theoretical and sensible observe file: It’s analyzed in a analysis paper, Ebb-and-Movement Protocols, and it’s the similar paradigm utilized by Ethereum each within the pre-Merge hybrid design of the Beacon chain in addition to in present day Ethereum.
Why finality issues
Nakamoto PoW consensus, launched with Bitcoin and inherited by Zcash, offers probabilistic finality. This implies the possibility {that a} block could be rolled again falls as extra blocks are mined.
In our view, the first problem with this type of finality is that totally different contributors independently react to rollbacks. For instance, most likely most contributors anticipate 1-block rollbacks (that are comparatively frequent), however as the scale of rollbacks develop bigger, three challenges emerge:
Bigger rollbacks grow to be extra uncommon, so some contributors could not have a course of or coverage for dealing with that state of affairs.
Completely different contributors could have totally different insurance policies, so within the occasion of a big rollback, the ecosystem could fracture as totally different contributors disagree on the best way to get better.
When counterparties require a sufficiently low tolerance for rollbacks, their interplay should incur a considerable delay.
Instance: trust-minimized bridge
To drive this level house, take into account the precious use case of a trust-minimized bridge: ZEC despatched right into a bridge should be locked up whereas an equal variety of proxy tokens are issued on one other community.
If a rollback reverts a bridge deposit after the proxy tokens are issued elsewhere, these ZEC are not locked within the bridge, and the proxy tokens at the moment are unbacked. This breaks the peg of the bridge, and lots of bridge customers will concurrently lose funds. If the bridge designers determine to require sufficient PoW blocks to make the chance of this occasion astronomically small, then issuing the proxy tokens on the opposite community may have a particularly massive delay.
Instance: alternate deposits
If a consumer deposits ZEC on a centralized alternate, their account on the alternate is credited the suitable quantity. If a rollback of this layer happens, the alternate accounting now has extra ZEC liabilities than precise ZEC held.
Exchanges search to handle this by requiring extra PoW blocks to achieve a sufficiently low chance of this occasion. Nevertheless, it is a balancing act: If an alternate imposes a delay of n hours, the chance continues to be not “astronomically small,” so customers are inconvenienced by n hours and the alternate nonetheless carries a sensible threat of a legal responsibility overhang occasion.
Moreover, due to problem quantity 2 above, totally different exchanges require totally different deposit delays, which doubtlessly confuses customers and places exchanges into competitors to tackle extra threat by accepting fewer block confirmations.
Finality
In distinction to probabilistic finality, a consensus protocol could present a finality assure. Protocols that do that make sure that all contributors agree on which set of blocks and transactions are remaining. The trade-off is that finality could fail to make progress within the occasion of community disruptions. As soon as the community recovers, the trailing finality can “catch up” to the PoW blocks which have been produced within the interim.1
Virtually, this implies if contributors are ready for a transaction to grow to be remaining, typically they could want to attend an arbitrarily lengthy period of time.
Finality addresses all three challenges to some extent:
Individuals now not must anticipate rollbacks of various possibilities when designing their procedures and insurance policies. As a substitute, they need to anticipate the danger that typically finality fails to progress in a well timed trend.
All contributors agree precisely which blocks and transactions are remaining, although they could disagree on the best way to react if finality is stalled for lengthy intervals of time.
Individuals could now depend on the finality assure to make sure they solely react to some transactions when there may be zero likelihood of the transaction being reverted.
Within the examples above:
A trust-minimized bridge can depend on finality for issuing proxy tokens. This ensures the bridge won’t ever be under-collateralized. The trade-off is that so long as finality stalls, cross-bridge transfers will even be stalled.
All exchanges can use the identical finality assure, so customers can count on the identical deposit delay in all places (and it’s more likely to be notably decrease than the established order). The trade-off is that if finality stalls, new deposits will even be stalled, although all exchanges will behave constantly on this regard.
The top end result for customers is that some high-value interactions (similar to bridging or alternate deposits) will now be quicker and safer more often than not. Generally finality could stall. When finality resumes, it would “catch up” to the PoW chain, so customers who don’t want the finality assure can proceed utilizing this hybrid protocol, equally to how they use Zcash immediately, and be unaffected if finality stalls.
Standing and open questions
This weblog submit introduction covers most of our R&D, thus far, on the TFL design. There are nonetheless many open points that must be resolved with collaboration and enter from the Zcash group earlier than a TFL design is prepared as a proposal for a Zcash improve.
An incomplete record of points that also must be resolved embrace:
Is that this basic strategy acceptable to the Zcash group?
How will new ZEC issuance be distributed between PoW, PoS, and any potential Dev Fund successor? This can be a key concern for each miners and potential stakers or delegators.
How can we combine every other adjustments to issuance mechanics, such because the Zcash Sustainability Fund?
The entire PoS accounting mechanics, similar to how bonding works, how delegation works, what sorts of slashing could happen, withdrawal delays and mechanics, and so forth.
How would PoS operations work together with all different Zcash ledger actions, similar to shielded swimming pools, and so forth.? This might be a key space for understanding how privateness and staking work together.
Ought to the chain tip ever stall as a way to sure the hole between the finalized block and the chain tip?
Detailed safety analyses, together with financial safety, a case evaluation of PoW seize, PoS seize, community safety (esp. given two separate community protocols/layers).
How can we guarantee cell shielded wallets are first-class contributors? For instance, can we guarantee they will safely and effectively delegate stake and handle stake-delegation positions? This contains each UX points, like delegation UI flows, in addition to implementation, similar to lightwalletd protocol adjustments.
The best way to combine any TFL protocol adjustments with different proposed protocol adjustments in a protected and well timed method. Examples: Zcash Sustainability Fund, Zcash Shielded Property, bridging efforts, Namada integrations, and so forth.
Choice of a particular finalizing PoS protocol. We’re at the moment specializing in utilizing Tendermint and ABCI as a strategy to quickly prototype and validate the design.
Prototypes, testnets, code structure, and so forth.
As we handle the open points above, particularly the interplay with different protocol options and coordination with these groups on timing, we will start to refine a deployment timeline.
Subsequent steps
Our subsequent steps for this TFL R&D initiative are to get group suggestions on this weblog, host a workshop at Zcon4, and produce R&D updates on the open points above.
As we collaborate with different protocol improvement groups, we’d prefer to create a tentative deployment timeline that comes with the entire different protocol characteristic efforts such because the Zcash Sustainability Fund, Zcash Shielded Property, and potential cross-chain bridge efforts.
Lastly, we’re looking for out different groups or people who’re excited by collaborating on this TFL undertaking, so in case you’re , please see the Get entangled part above.
1 In a pure finalizing PoS protocol, the equal “stalls” are literally network-wide halts. One energy of this hybrid design is that PoW needn’t halt, and if it doesn’t then customers who don’t rely upon finality can proceed utilizing the community.
