- The new cryptocurrency Vault drastically decreases the amount of data a user needs to join the network and verify transactions.
- It reduces the storage and bootstrapping cost for 500 million transactions to 477 MB, compared to 143 GB for Bitcoin and 5 GB for Ethereum.
For decentralized electronic payments, cryptocurrencies seem to be the most promising approach these days. However, to support a large number of users and transactions, cryptocurrencies need to address two important and related bottlenecks: Bootstrapping (how much data a user has to download to join the network) and storage (how much data every user must store).
For instance, to join the Bitcoin network and verify that it received a correct state, a user must download approximately 200 GB of data, as of January 2019. This makes the process extremely slow for some users.
Recently, a research team at MIT came up with a new cryptocurrency that drastically decreases the amount of data a user needs to join the network and verify transactions by up to 99% compared to existing well-known cryptocurrencies. Thus, the network can scale well (unlike Bitcoin, costs do not increase linearly with the number of transactions).
How Does This New Cryptocurrency Work?
The new cryptocurrency named Vault allows users to join the network by downloading only a small part of the whole transaction data. For verification, it uses only the most recent transaction data which is split and distributed across the network to minimize user’s processing and data storage requirements.
Every single block in this cryptocurrency consists of a hash (unique identification string), its location in the blockchain, and a timestamp. Each new block consists of a hash of the preceding block, and one block can carry up 10 MB of data — or up to 10,000 transactions — that needs to be verified by all users.
Vault is built on a secured cryptocurrency network named Algorand, which is more scalable than other existing cryptocurrencies. It uses a ‘proof-of-stake’ model for verifying blocks and enabling new users to join the network in an efficient manner.
A representative verification ‘committee’ is opted for each block. Users carrying more stake (money) in the network have higher chances of being selected. Instead of verifying every transaction, users only need to verify certificates to join the network.
Each new certificate has verification information based on preceding hundreds of blocks known as ‘breadcrumb’. At the time of joining, users match the breadcrumb of previous blocks with a breadcrumb of following blocks.
That breadcrumb can then further be matched with another breadcrumb of following blocks, and so on. In this way, users only require one previous block to verify another block in the future, skipping over all in-between blocks and saving a significant amount of bandwidth.
How It Reduces Data Storage Requirements?
The sharding scheme in Vault splits the transaction data into smaller chunks and distributes it across the network so that each user doesn’t have to process a large volume to data to verify transactions.
To do this in a secure way, Vault implements a binary Merkle tree, in which root node contains a hash of a single block and each bottom nodes contains a hash representing balance information of one account involved in one block transaction.
The tree is built from the bottom up and block hash and balance has are connected together. The network joins the two children nodes to obtain the parent node hash and verify any individual transaction.
The Merkle tree is divided into individual shards and assigned to different sets of users. Unlike conventional cryptocurrencies, each shard stores a smaller piece of a massive data structure, which allows users to verify transactions from other parts of the network.
Moreover, shard accounts holding zero balance for a specific period of times are discarded automatically, freeing up space on network.
The implementation of Vault prototype showed that it can reduce the bandwidth of joining the network up by 90.5% compared to Ethereum and 99.7% compared to Bitcoin when downloading a ledger consisting of 500 million transactions.