I’m back to Ellipticoin being a layer 1 solution again! After toiling with the staking contract for about a month I realize it's actually going to be less work to build a base layer blockchain than it will to build a layer 2 solution on top of Ethereum. I think it's also a lot more interesting to create a layer 1 solution as well. Here's how it's going work:
The consensus mechanism will be a hybrid proof of work/proof of burn system. At any time miners can send tokens to the burn address. Miners will compete to find the next block using the hashcash algorithm used in Bitcoin with one minor adjustment: before miners would hash a block hash and a nonce and complete to find a significantly low hash value:
Hash(Block Hash + Nonce)
(+ is the concat operator)
In Ellipticoin's hybrid model the miner can include burn transactions in the hashed contents as well:
Hash(Block Hash + Nonce + Burned Transaction 1 + Burned transaction n)
Including burned transactions will have a multiplier effect on the chances of that miner winning the block. So a block that's mined with difficulty 1 and burned 10 coins will “beat” a block that's mined with difficulty 2 and burned 2 coins. A constant will be chosen so that difficulty and burn value will be weighted properly. The goal will be 0.01% of of burned value should be energy and 99.9% should be burned tokens.
The idea here is that in the current Bitcoin network miners who spend more money on energy can increase the number of hashes they generate and therefore increase their chances of winning a block. In the Ellipticoin protocol miners will purchase and burn tokens instead. This has all the same economic incentives as the current system with some nice additional benefits. First, burning coins is much more energy efficient than burning energy. Also, it levels the playing field as the price of energy will probably vary more based on where you are in the world than the price of tokens will. This also allows the protocol to “recycle” the burned coins back into the system to pay for continued security.
Ellipticoin's monetary policy will be very similar to Bitcoin's. There will only ever be 21 million Ellipticoin's. The supply curve will almost match that of Bitcoin's except it'll start 10 years later. Once issuance slows the network can continue to use burned coins to pay out miners at a constant rate for continued security. That way the network will never have to rely on transaction fees alone to fund itself.
Ellipticoin will have mostly of the same economic incentives as existing protocols so very little new research will need to be done in order for it to be built.
One additional detail I thought of was weighting the harvesting of “older” burned transactions as more valuable. That would incentivize more people to burn more tokens earlier. This is something I want to think more about.
I'll continue to keep you all posted on my progress.
Thanks for reading!
If you have any questions or comments swing by the Ellipticoin Telegram room and say hello!