jl777
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January 10, 2014, 04:29:43 PM |
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OK, I blasted out some high level text. Lots of holes need to be filled, but I need help. I need to go offline for a few hours.
Anybody can contribute, just sign up for wiki acct and get added as editor.
James
NXT: a peer-to-peer electronic economy system[edit]
Abstract[edit]
Bitcoin has proven that a peer-to-peer electronic cash system can indeed work and fulfill payments processing without requiring trust or a central mint. However, bitcoin has several shortcomings that prevent it from becoming the basis of an electronic economy. In order for an entire electronic economy to be based on a peer-to-peer solution, it must be able to do the following:
Process thousands of transactions, quickly
Provide a means for generating income
Practical means for adding new features
Be able to run on mobile devices
NXT satisfies all these requirements and additionally eliminates the Ghash arms race that bitcoin's proof of work requires. NXT is based on 100% proof-of-stake and this required an initial distribution to be made. While many are not comfortable with the specific initial distribtion of the genesis block, as BCNext himself said, "nothing that involves money can be perfect" [need to find exact quote]
The fundamental improvement of NXT is Transparent Forging. This is the key innovation that NXT has which allows it to process thousands of transactions per second.
Introduction[edit]
With bitcoin's introduction and acceptance in the marketplace, there quickly appeared variants which usually changed a single aspect of bitcoin. The practical difficulty of getting a consensus of all the bitcoind servers made it easier to just create a new coin entirely. There are currently over 100 altcoins that are based on the original bitcoin source code. While each altcoin presumably has some unique advantage over bitcoin in some contexts, the proliferation and fragmentation of features makes the success of any more than a handful of altcoins doubtful. Additionally, since the altcoins are based on bitcoin source code, they by and large inherit bitcoin's limitations.
In order to speed up transaction processing, some altcoins have simply sped up the time that each new block is created. However, even with a one minute per block, requiring 10 confirmations extends the time to 10 minutes. This is acceptable for large purchases, but impractical for smaller everyday items. To scale transaction processing to the thousands per minute level, would require enormous amount of peer-to-peer bandwidth, or a centralized processing of transactions. The former being currently impractical due to typical internet connections speeds and the latter seemingly in direct contradiction to the distributed peer-to-peer requirement. Transparent Forging is the solution that allows the entire network to predict which node will forge the next block and thus to be able to directly transmit transactions. This eliminates the network speed bottleneck.
An often overlooked deficiency with bitcoin is its nature as a store of value, like a precious commodity. In and of itself, it is not possible to earn any interest. This might seem like a small deficiency, but there is a reason most people don't store all their wealth in gold. If you have a significant amount of wealth, it makes more sense to store the wealth in income producing assets. The only way to make money directly with bitcoin is to speculate on its future price. NXT has an innovative mechanism to recirculate transaction fees by awarding all the transactions fees for the current block to the node that forges that block. In its current state, there are only two means for generating transactions fees, but as NXT gains more and more features, the income each NXT generates will continue to increase. Since NXT has a practical mechanism for adding new features via its Voting feature, it is expected that the most promising new features will get community approval to be added. This in turn will increase the amount of transaction fees and the effective interest rate that NXT generates.
By combining all these features into a single extensible framework, NXT is fully capable of being the basis for a full fledged electronic economy. From microtransactions, to income generating investments, to public IPOs [need all the cool things NXT enables here]
Transactions[edit]
In order to calculate the balances of each NXT account, it is required to scan the entire blockchain. While this might sound inefficient, with the current day network speeds and CPU speeds, it is not that big of a computational task. This offloads the work required of the NXT server and thus allows even low powered mobile devices to be a NXT node.
The details of a NXT transaction are as follows: 1. Step 1 2. Step 2 3. Step 3 4. Step 4 [little help here!]
Proof-of-Stake[edit]
The NXT proof of stake uses the public keys of [not sure of details] to prevent bad guys from doing bad things to the network. [Need details of specific mechanism of validating proof of stake]
Network[edit]
The NXT network consists of two types of nodes. Hallmarked nodes that do the heavy lifting and normal nodes that help out with the overall network robustness. Each hallmarked node is given a weight that is based on the amount of NXT associated with the hallmark. NXT usage of a two tier network allows heavier duty servers to do most of the work, while allowing mobile devices to also be a full fledged node as far as peers are concerned.
[a bit fuzzy on all the intricacies of hallmarked nodes. need a much better explanation]
Transparent Forging[edit]
"Transparent Forging" allow each user's client to automatically determine who will generate the next block, so that they can then send their transactions to that node. This will also allow additional fees to be realized for immediate/priority transactions.
An equally important feature of Transparent Forging is an outstanding security feature of the protocol to temporarily reduce to zero the forging power of nodes who should generate the next block but don't. This transparent forging feature will prevent against even a 90% majority owner of all NXT branching out and forcing a fork. So if a node that has 90% of all Nxt, and doesn't generate a block when scheduled, the system will reduce its mining power to zero temporarily to prevent a bad fork from being forced.
Transaction Fees[edit]
Transaction fees are currently set at a minimum of 1 NXT per payment and until the average number of transactions comes close to filling each block, the 1 NXT will be enough to get included. As NXT price increases, the minimum fee is planned to be reduced to continue to allow microtransactions to be practical. With bitcoin's transaction fee of .0001 BTC, it starts becoming less and less practical as the price of bitcoin increases. With one billion NXT and a transaction fee that is reduced as the market price goes up, we can expect NXT to be useful for microtransactions for many years. In the event that even smaller increments are needed, there is provision to issue colored coins that can denote anything, including milliNXT, microNXT or even femtoNXT.
Reclaiming Disk Space[edit]
Blockchain bloat is an issue that needs to be addressed, especially for the high volumes that NXT is expected to handle. Typically, actions that add to the blockchain are charged in accordance with the space that is used, so that will limit the bloat. However as time goes on, it is inefficient to recalculate everything from the genesis block. NXT plans on an annual housecleaning [better term needed] that will create a starting point for all the nodes to use. By using digital signatures, the validity of the annual checkpoints can be ensured.
Voting System and New Features[edit]
NXT has a built in Voting System that allows community wide voting on anything. Most important to the extensibility of NXT is the addition of new features. New features make NXT more powerful and this attracts a larger user base, also it is expected that the more features there are, the more transaction fees will be generated. NXT having a built in mechanism for globally adding new features is not strictly a technical innovation as this is something that can be done by any community, however the fact that NXT does have this makes the expectations of ever growing transaction fees a likely one to become true.
Device portability[edit]
Due to it's Java roots, proof-of-stake hashing and ability to trim/reduce the block chain, NXT is extremely well suited for use on small, low-power, low-resource devices. Android and iPhone applications are currently being developed and the NXT Reference Software (NRS) has already been ported and running on low-powered ARM devices such as RaspberryPi with work continuing on other ARM based development boards.
It would be easy to imagine and implement NXT on low-powered, always connected devices such as smart phones. The majority of the network could be supported on these devices. Since millions of people world wide already possess smart phones, NXT could quickly be deployed among these devices to help support the network without the costs associated with traditional crypto-currencies.
NXT features, such as instant transactions make smart phones an optimal platform for use the use of NXT in everyday monetary transactions (Food, Fuel, etc.). While solutions exist for other crypto-currencies (e.g. Bitcoin) in this realm, the use of these devices do not actually contribute to the stability or health of their networks because of the massive resources (computing power) needed to maintain these networks. With NXT, any device that has the ability to send and receive transactions also has the necessary computing power to add to the network stability and further decentralization.
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