The total value of the digital currency Bitcoin is now approximately $3.4 billion, and many companies and investors are working to prove that the technology can make financial services cheaper and more useful.
But Stanford professor David Mazières thinks he has a faster, more flexible, and more
secure alternative. If Mazières is correct, his technology could make digital payments and other transactions cheaper, safer, and easier—particularly across borders. He released the design for his system in a white paper last Wednesday – according to an article in Technology Review.
Bitcoin transactions rely on software run on thousands of computers linked up over the Internet. That distributed network uses a set of rules and cryptographic principles to reliably verify transactions even though no one person or organization is in control.
Mazières’s new cryptocurrency protocol, called SCP, is being adopted by a nonprofit called Stellar to replace a Bitcoin-inspired system meant to make financial services cheaper and more widely accessible in the developing world (see “Bitcoin-Inspired Digital Currency to Power Mobile Savings App”). Stellar’s original system was modeled on one developed at the startup Ripple Labs, which is using it to help banks and other financial organizations move money faster (see “50 Smartest Companies 2014: Ripple Labs”).
Last year Stellar’s system unexpectedly “forked” into two networks that disagreed on which transactions were valid, and several hours’ worth of transactions got rolled back. Mazières says his new system avoids the part of the design that caused that problem. (Ripple maintains that its design is safe if used correctly.)
Mazières is taking leave from Stanford to work four days a week on the project as Stellar’s chief scientist. Stellar’s backers include the payments company Stripe (see “Increasing the GDP of the Internet”).
Bitcoin’s design rests on a process called “mining,” in which people run software that races to solve mathematical puzzles. Solving a puzzle verifies recent transactions made in Bitcoin and earns the solver some newly created bitcoins or some transaction fees (see “What Bitcoin Is and Why It Matters”). The distributed calculations also protect against fraud: you would need to gain control of more than half the total computing power working on mining to be able to, say, spend one bitcoin twice.
However, it currently takes around 10 minutes for a new transaction to be confirmed by the miners, and mining is very energy intensive (Bitcoin miners together consume as much electricity as Ireland, researchers estimated in 2014). Mazières says that using mining to enforce trust and security also has limitations. “Bitcoin is good, but we wanted to start from scratch and address some of these additional properties,” he says.
The new SCP system also relies on people running software that communicates over the Internet, but trust is not enforced through mining. Instead, each person running the software must identify a few other trusted participants to correctly apply the cryptographic rules used to validate transactions. Each instance of the software will recognize transactions only once a certain majority fraction of its trusted partners have also signed off. And the trust relationships are all public.
Mazières says the math shows that those rules will allow his system to reliably verify transactions much more quickly and with less energy.
Dan Boneh, a Stanford professor who did not work on Mazières’s system but has reviewed it, says that SCP avoids some security limitations of Bitcoin. “The security proposition of Bitcoin is that the people who invested in mining infrastructure can be trusted, but that may not be true,” he says. “Here I can choose for myself who to trust.”
SCP also allows use of stronger cryptography, says Boneh. Bitcoin’s cryptography can only be so strong, because it needs to remain possible for miners to solve the puzzles. “By design, you can’t crank up the hardness of Bitcoin to the point it’s infeasible for a well-resourced attacker,” says Boneh. “With this you can.”
Emin Gün Sirer, an associate professor at Cornell University, agrees that SCP seems to have advantages over Bitcoin. He says it also seems to resolve what he considers a gap in the Ripple protocol that led to Stellar’s “forking” problem last year. “The protocol looks sound,” says Sirer.
It is, however, theoretically possible for SCP to break down if participants choose trusted partners in such a way that there aren’t enough overlaps to tie the network into one whole—or if an attacker orchestrates that situation, says Sirer. Just how unlikely that is will depend on the actions of the people who adopt SCP. “This is a social thing, not a technical thing,” says Sirer.
Mazières acknowledges that possibility but says it’s unlikely. He imagines that certain large organizations, perhaps banks, will emerge to anchor the SCP network. Still, he acknowledges, “people are always a weak point.”