Nonlinear Proof-of-Work: Improving the Energy Efficiency of Bitcoin Mining

Abstract

Bitcoin is probably the most well-known blockchain system in existence. It employs the proof-of-work (PoW) consensus algorithm to add transactions to the blockchain. This process is better known as Bitcoin mining. PoW requires miners to compete in solving a cryptographic puzzle before being allowed to add a block of transactions to the blockchain. This mining process is energy-intensive and results in high energy wastage. The underlying cause of this energy inefficiency is the result of the current implementation of the PoW algorithm. PoW assigns the same cryptographic puzzle to all miners, creating a linear probability of success between the miner’s computational power as a proportion of the total computational power of the network. To address this energy inefficiency of the PoW mining process, the researchers investigated whether a nonlinear probability of success, between the miner’s computation power and its probability of success, will result in better energy usage. A nonlinear proof-of-work (nlPoW) algorithm was constructed by using a design science approach to derive the requirements for and structure of the algorithm. The Bitcoin mining process was tested through statistical simulation, comparing the performance of nlPoW with PoW. Preliminary results, simulating a network of 1000 miners with identical computational power, indicate that nlPoW reduce the number of hash computations, and therefore the energy consumption, required by Bitcoin mining. The findings are significant because nlPoW does not reduce the degree of decentralised consensus, or trade energy usage for some other resource as is the case with many other attempts to address the energy consumption problem in PoW.

Permissionless Blockchain Systems as Pseudo-Random Number Generators for Decentralized Consensus

“…Nonlinear Proof-of-Work (nlPoW) [59] improves PoW by recognising that PoW assigns the same computationally hard puzzle to each participant in the blockchain network. nlPoW randomly gives a unique puzzle to each miner during each block round, making the probability of successfully mining a block nonlinear to its proportion of the computational power in the network.…”

Defining Decentralisation in Permissionless Blockchain Systems

“…Furthermore, this study defines a blockchain system as a combination of stakeholders and technologies that produce, consume, or interact with required services, or are enabled by the use of a blockchain data structure. While permissionless blockchain systems may differ in their intended application and architecture, they all share essential objectives (Bezuidenhout et al, 2020).…”

Embedding Tamper-Resistant, Publicly Verifiable Random Number Seeds in Permissionless Blockchain Systems

“…This is currently the case with, for instance, Bitcoin mining. These self-interest strategies may have unintended or undesirable consequences, such as inefficient resource use [26].…”