From: Tamas Blummer <tamas@bitsofproof.com>
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Message-Id: <417518B4-1E4D-4467-BC87-95C9EAF0C599@bitsofproof.com>
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Date: Wed, 10 Dec 2014 08:35:01 +0100
References: <54876653.4020403@certimix.com> <548769FA.5040406@bluematt.me>
	<CA+s+GJAe9MeO+Sr0+2BRwu3q-Be5JQt_s_xdnBBEcquXqOyxcA@mail.gmail.com>
To: Bitcoin Dev <bitcoin-development@lists.sourceforge.net>
In-Reply-To: <CA+s+GJAe9MeO+Sr0+2BRwu3q-Be5JQt_s_xdnBBEcquXqOyxcA@mail.gmail.com>
Subject: [Bitcoin-development] Merged mining a side chain with proof of burn
	on parent chain
Precedence: list


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We spend scarce resources external to the digital realm to create =
Bitcoin. Real world sacrifice is needed to avoid =93nothing at stake=94  =
and sybil attacks. With Bitcoin we now have a scarce resource within the =
digital realm, so it appeals my intuition to re-use it for sacrifice =
instead of linking again an external, real world resource.=20

In following I outline a new mining algorithm for side chains, that burn =
Bitcoins to secure them.

The side chain block validity rules would require that a transaction on =
the Bitcoin block chain provably destroys Bitcoins with an OP_RET =
output, that contains the hash of the block header of the side chain. To =
also introduce a lottery, the burn transaction=92s hash is required to =
satisfy some function of the block hash it was included in on the =
Bitcoin block chain. For example modulo m of the burn transaction hash =
must match modulo m of the block hash, that is not known in advance.

Those who want to mine the side chain will assemble  side chain block =
candidates that comply the rules of the side chain, then a Bitcoin =
transaction burning to the hash of the block candidate and submit it to =
the Bitcoin network. Should he burn transaction be included into the =
Bitcoin block chain and the Bitcoin block=92s hash satisfy the lottery =
criteria, then the block candidate can be submitted to extend the side =
chain.

A side chain block header sequence would be accepted as side chain trunk =
if a sequence of Bitcoin SPV proofs for burn transactions prove, that =
linked blocks have the highest cumulative burn, if compared to =
alternative sequences.=20

The Bitcoin miner will include burn transactions because they offer =
Bitcoin fees. Bitcoin miner can not selectively block side chains since =
the hashes associated with the burn do not disclose which side chain or =
other project they are for. Here you have a =93merged mining=94 that =
does not need Bitcoin miner support or even consent.

Mining difficulty of the side chain could be adjusted by stepping up the =
required burn and/or hardening the criteria that links a burn proof =
transaction with the bitcoin block hash it is included in.

The difficulty to mine with burn would be dynamic and would also imply a =
floating exchange rate between Bitcoin and the side coin.

Tamas Blummer
Bits of Proof

00000000000000001172380e63346e3e915b52fcbae838ba958948ac9aa85edd

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