Targeted Nakamoto: A Bitcoin Protocol to Balance Network Security and Energy Consumption

Abstract: 

In Proof-of-Work blockchains, such as Bitcoin, miners assemble transactions into blocks and compete to solve a mining puzzle. The winner earns a block reward and its block is appended to the chain. We propose an extension to the Proof-of-Work protocol that targets an upper limit on the hashrate applied by miners in guessing solutions to the mining puzzle. Since hashrate uses electricity, the protocol places an upper bound on the energy required to operate the blockchain conditional on the hardware used by miners. The protocol uses only information that is recorded on the blockchain. It sets a hashrate upper bound target; uses mining puzzle difficulty as a signal of total hashrate and implements the policy of imposing a ceiling on the block reward when the target is exceeded. We demonstrate that this protocol pushes down energy consumption when the hashrate exceeds the target.

This work was funded by the DCI ‘s Bitcoin Security Initiative. 

Authors:

Dr. Daniel Aronoff, MIT