Meet The New Global Superpower: The Libra Association
Within Libra, we see the concept of validators — known as replicators — joining together to create a consistent viewpoint of the transactions within the infrastructure. These replicators will be the top-level controllers of the currency.
In the following diagram, Bob, Alice and Trent are the validators, and will read from the public blockchain to view the transactions and they then form a consensus on the current state of the infrastructure. Carol can then interact with the Libra public blockchain using pre-defined — or user generated — smart contracts:
The smart contracts will be defined in a new programming language: Move. A key element of the overall security of Libra will be the robustness of these contracts, and whether they can be written in a way which stops malicious contracts being created (such as creating back-doors for Eve to receive a cut of each transaction, without Carol knowing about it).
A complete ecosystem
This infrastructure becomes far more than just a stable coin, and is a complete infrastructure for a payment back-end, and where transactions are recorded onto the blockchain, and then the replicators agreeing on the who has what. Basically it mirrors our existing banking industry, and RBS, Lloyds, and Barclays must agree as to how much money each of their customers has in their accounts, and through the transactions they perform. The Libra database becomes the consensus. Every transaction is signed using public keys.
Perhaps the replicators — and which form the Libra Association — are a short-term fix for any initial start-up problems — as happened with Ethereum — and that they could be switched off eventually, and run completely off the Libra public blockchain? It is likely that the Libra Association will grow, and could integrate a voting/reputation system to provide stability for the coin.
Towards crypto assets
At its core, the Libra infrastructure supports cryptographic assets, and can be used for a range of application. Its first offering is a stablecoin: Libra. This is then likely to expand to support an open system for the creation of crypto assets within entities only requiring a holding Libra. Basically it becomes a proof of stake system, and where entities can be part of it, as long as they have ownership of some Libra. This may lead to problems — but the Association has around five years to sort this out, before running it live. A core objective, though, is to move towards a permissionless system — a transition that has never actually happened before (as we have seen a move from permissionless transactions to permission ones).
For Carol, all she is worried about is whether she can cash-out her Libra currency into her bank. This a core element of Libra is that an exchange will peg the value of the coin to fiat currency, so that she will know exactly what the value of the coins she has. In a way, this could clear the way for a generic currency to transfer between different fiat currencies. For RBS, say, they may have to transfer $1million from a US company to a UK one. A natural way would be to just transfer 1 million Libra coins to the UK company, and then for them to cash out through an exchange. The pegging is highly attractive, and may stop many cashing-in on transaction fees, and create almost instance transfers. The centralised consensus of the Libra Association will aim to make sure a fast consensus happens, and which is trustworthy. This is NOT an easy task, and will have to grow over time.
Follow the leader
The infrastructure uses a Byzantine Fault Tolerance (BFT) method to elect a leader within the validators, and it is the leader which accepts transactions from its clients, and also from other validators, and then creates a new ledger of based on all the transactions. The others validators then vote on this to approve (or not) the new state of the infrastructure. In the Libra specification this is known as LibraBFT, and is based on the HotStuff consensus protocol [here]:
It involves defining a transaction (T) and then creating a signature for its complete history. This has the advantage that the other authenticators will not have to replay the whole history of the transaction, and thus significantly reduce this performance overhead. A worry here is now that a person’s transaction history could be revealed through these mechanisms, and there is little in the way of privacy-preserving methods applied into this. The mechanism selected for Libracoin is to use pseudonyms to identify users, and where users can have multiple key pairs, and which cannot be linked. This avoids the complexity of the anonymised cryptocurrency methods such as zCash and Mimblewimble, and allows for smart contracts to operate more simply. The opportunity is there, though, to build anonymization through the applications being developed, such as adding blinding factors and scrambling to the transactions before they hit the public blockchain.
The LibraBFT method defines that 3f+1 votes are given to the validators and are honest (Byzantine). If f votes are controlled by good validators, the network remains robust against a range of attacks, including double spend and forks. There is also protection against the leader being brought down in the face of a Denial of Service (DoS) attack.
So what?
But there are many questions that are unanswered, and I’ll try and answer these in following articles:
- What will the transaction fees be?
- How will forks be managed?
- How will the network deal with malicious entities who have proof of stake?
- How will AML (Anti-money laundering) be dealt with? To be adopted by countries, it is likely that users will require a government-issued ID.
- What control will the association have in licencing applications?
- What will the performance be like? It is thought that the system will allow around 1,000 payments per second, and a commitment time of just 10 seconds.
- How many validators will be required? It is likely that this will be around 100, in order to produce fast consensus.
One thing is for sure, nothing will be the same after the release of Libra. It is just the start, and we could see a whole crypo asset infrastructure being built. In fact, our new society could be build within it. Our governments and banks need to wake up to this, and start to make plans, otherwise their control will crumble in the same way our music industry crumble in the face of streaming services.
Published at Sat, 22 Jun 2019 09:00:53 +0000
