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The earliest consensus mechanism is the Proof of Work (PoW) consensus mechanism. This protocol is currently implemented in Bitcoin and Ethereum. In PoW systems, transactions broadcast through the network are grouped together into nascent blocks for miner confirmation. The confirmation process involves hashing transactions using cryptographic hashing algorithms until a merkle root has been reached, creating a merkle tree:
Cryptographic hashing algorithms are useful in network attack prevention because they possess several properties:
● Input/Output length size - The algorithm can pass in an input of any length in size, and outputs a fixed length hash value.
● Efficiency - The algorithm is relatively easy and fast to compute.
● Preimage resistance - For a given output z, it is impossible to find any input x such that h(x) = z. In other words, the hashing algorithm h(x) is a one-way function in which only the output can be found, given an input. The reverse is not possible.
● Collision resistance - It is computationally infeasible to find any pairs x1 ≠ x2 such that h(x1) = h(x2). In other words, the probability of finding two different inputs hashing to the same output is extremely low. This property also implies second preimage resistance.
● Second preimage resistance - Given x1, and thus h(x1), it is computationally infeasible to find any x2 such that h(x1) = h(x2). While this property is similar to collision resistance, the property differs in that it is saying an attacker with a given x1 will find it computationally infeasible to find any x2 hashing to the same output.
● Deterministic - maps each input to one and only one output.
● Avalanche effect - a small change in the input results in an entirely different output.
These properties give the cryptocurrency network its intrinsic value by ensuring attacks do not compromise the network. When miners confirm a block, they are rewarded tokens as a built-in incentive for network participation. However, as the global cryptocurrency market capitalization steadily increased, the miners became centralized and focused their computing resources on hoarding tokens as assets, rather than for network participation purposes. CPU miners gave way to GPUs, which in turn gave way to powerful ASICs.
To solve the energy waste issue, the Proof of Stake (PoS) consensus mechanism was proposed by many new networks. In PoS networks, token holders lock their token balances to become block validators. The validators take turns proposing and voting on the next block. However, the problem with standard PoS is that validator influence correlates directly to the number of tokens locked up. This results in parties hoarding large amounts of the network’s base currency wielding undue influence in the network ecosystem.
The LGCY consensus mechanism uses a Delegated Proof of Stake system in which 27 Governing Branches (GBs) produce blocks for the network. Every 6 hours, LGCY account holders who freeze their accounts can vote for a selection of GB candidates, with the top 27 candidates deemed the GBs. Voters may choose GBs based on criteria such as projects sponsored by GBs to increase LGCY adoption, and rewards distributed to voters. This allows for a more democratized and decentralized ecosystem. GBs’ accounts are normal accounts, but their accumulation of votes allows them to produce blocks. With the low throughput rates of Bitcoin and Ethereum due to their PoW consensus mechanism and scalability issues, LGCY’s DPoS system offers a mechanism resulting in 10000 TPS compared to Bitcoin’s 3 TPS and Ethereum’s 15 TPS.
For the first year before the Libertas Protocol is implemented along with our revolutionary USDL gas token, the LGCY protocol network will generate one block every three seconds, with each block awarding 32 LGCY to Governing Branches. A total of 336,384,000 LGCY will be awarded the first year to the 27 Governing Branches. Each time a GB finishes block production, rewards are sent to a sub-account in the super-ledger. GBs can check, but not directly make use of these LGCY tokens. A withdrawal can be made by each GB once every 24 hours, transferring the rewards from the sub-account to the specified GB account.
The three types of nodes on the LGCY network are Witness Node, Full Node, and Solidity Node. Witness nodes are set up by GBs and are mainly responsible for block production and proposal creation/voting. Full nodes provide APIs and broadcast transactions and blocks. Solidity nodes sync blocks from other Full Nodes and also provide indexable APIs.