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Will blockchain technology be good for the planet? I’ve been asking people about that, and the first impression is that it will be incredibly wasteful using networks of computers to redundantly verify transactions for cryptocurrencies, nonfungible tokens (NFTs), and ultimately the metaverse. The second impression is that it could be a lot less wasteful shifting to cryptocurrency than relying on our current financial system. I talked about this with one of the experts in the field, and we delved into these myths on a more factual level.
Kiayias is chief scientist at Input Output, a blockchain engineering company. It’s the driving force behind the Cardano blockchain, which is a third-generation cryptocurrency, which tries to improve on second-generation cryptocurrencies such as Ethereum and first-generation cryptocurrencies like Bitcoin.
A decentralized cryptocurrency keeps track of all transactions by all addresses on a peer-to-peer shared record. One of Cardano’s innovations is the ability to support high-transaction capacities, fast transaction times, and low transaction fees, through a system of proof-of-stake. Cardano is not minable. The blockchain is a record of all transactions, but rather than validation by anyone who performs the proof-of-work, transactions are validated by consensus proof-of-stake. This is also far more environmentally friendly than mining other cryptocurrencies, as they are not using enormous amounts of electricity.
Input Output builds blockchain-based products for governments, corporations and academic institutions and upskill people across the world, and it is focused on making blockchain technology that is environmentally friendly. That’s going to be necessary as we move toward the metaverse, the universe of virtual worlds that are all interconnected, like in novels such as Snow Crash and Ready Player One. VB journalist, Kyle Wiggers examined the environmental implications of this in a recent piece on the environmental impact of the metaverse.
Input Output has contributed $500,000 to Stanford University to allow blockchains to process many transactions even with limited connectivity, providing support for the Tse Lab at the Department of Electrical Engineering of Stanford University. The aim is to enable even smartphones to handle blockchain transactions, while offline, to lessen the amount of electricity used in transactions.
Here’s our edited transcript with Kiayias, who is also chair in Cybersecurity and Privacy at the University of Edinburgh.
VentureBeat: I wanted to hear more about the work you’ve been doing. Could you start there? I’d like to hear about the background, and the interest you’ve had in the energy usage of blockchain.
Aggelos Kiayias: I’ve been working in cryptography since about the mid-’90s. I was a mathematician originally. Cryptography was my passion when I was an undergraduate. It was a very different time, as you know. But we’re in an exciting time now, especially for those of us working in this area. A lot of these ideas we had on a blackboard, now the time has come to see them implemented, deployed, and used by people. It’s a great time.
With respect to energy efficiency, that was one of the very early open questions in the space. Bitcoin was doing something amazing. It was capable of providing an IT service without having any centralized entity that provides it. It’s a self-registered service. You could be part of the service provision by just registering yourself as a node. That’s pretty remarkable. It was unheard-of to deploy an IT service like that before. It’s great to focus on Bitcoin from this angle because it moves away the cryptocurrency, so to speak. There’s a lot to learn from Bitcoin just from studying how it’s possible to deploy a global scale IT service like that, automatically.
At the same time, the observation was, early on — we’re talking about very soon after Bitcoin was deployed. You had this huge energy expenditure, and it was only getting worse. Another thing that makes the situation even worse than just the energy expenditure is that the product is agnostic of the source of energy. It motivates you to find the cheapest possible energy, and the cheapest energy that you can find might not be an energy that we want to harness. It might be based on non-renewable carbon-based fuels and so forth.
Early on, then, there was an open question around how it was possible to create the service, create the system like that of Bitcoin, but without having the same energy expenditure. That was something that motivated me. It was more than seven years ago when I started working on this, this particular question. Soon we were looking at various flavors of proof of stake. The problem is, none of these protocols were designed in a way that you could be convinced that they would actually work. A lot of my effort was to apply this mathematical rigor that we apply in traditional cryptographic protocol design. It’s not so traditional because cryptography is a very young discipline, but let’s say traditional with respect to what you would get in a system like Bitcoin, which is very new, the new kid on the block so to speak.
The question is, is it possible to apply that same mathematical rigor and extract a protocol that can give you the benefits of Bitcoin, this decentralized service provision, an automatic service that can appear out of the self-interest of the nodes that join the network? And it turned out that it’s possible to do it. We were very good at not only designing the Ouroboros protocol, but getting it deployed, and in general influencing a lot of deployment. The protocol I designed not only found itself as the backbone of Cardano, which I’m sure you’re familiar with, but also influenced the design of other systems. Polkadot used elements of Ouroboros to design their system, as well as in other efforts.
This is also characteristic of a lot of the work we do. This is work we make publicly available. We have a tradition of scientific peer review. We try to put it in the context of the scientific development of cybersecurity and computer science at large. We validate it not just with cryptocurrency experts, but we validate it in a scientific way with people who have experience in designing computer science protocols, and specifically cryptographic protocols. That gives you a bit of the story behind some of that work.
VentureBeat: What do you think about the energy usage of the different protocols that are out there? If you look at Bitcoin or Ethereum or what some Layer-2 solutions do, taking the energy consumption down quite dramatically, to the point where it’s maybe not as big a concern anymore — are there still some things to be concerned about?
Kiayias: I wouldn’t say I’m optimistic that Layer-2 is going to help much. The protocol itself, which is the backbone — as long as Layer-2 fundamentally relies on Layer-1, and if that Layer-1 is a proof of work-based Layer-1, then the only thing that makes it work … is energy expenditure. Energy expenditure is going to go up as long as engaging in this mining operation is profitable. If Layer-1 has high utility, then having high utility is also — it could also be that it supports a very successful Layer-2 that’s also part of its utility. Even if Layer-1 is just the mediator of all the various things that happen at Layer-2, it’s still going to be a critical part of the infrastructure. It’s still going to be profitable to mine with it. It’s still going to consume vast amounts of energy. The design of the protocol itself is such that it consumes this amount of energy.
Now, this is not to say that the protocol is flawed. It’s designed exactly to do that. The question is whether it’s worth it. We do a lot of things on planet Earth that consume vast amounts of energy. Bitcoin is one of them. The question we have to constantly ask ourselves is whether this is the best use of the resources we have, the technology we have, at any given time. Technology, after all, is always about finding and optimizing designs, proving them, understanding the problem you want to solve, and finding the most cost-efficient way to do it. In many ways Bitcoin showed the way. However, the way it spends its resources, it doesn’t seem, at the moment, to be the best possible use of what we spend versus what we get out of it. That’s not aligning.
VentureBeat: As far as something like Ethereum forking over to proof of stake, do you believe that solves a lot of the problem? Or do we still have problems around that?
Kiayias: It certainly removes the energy expenditure fact. Any proof of stake protocol — there are differences between protocols. There are plenty of differences between proof of stake protocols. But in terms of energy expenditure, proof of stake protocols are similar in the sense that they use relatively small levels of energy, on par with running traditional servers. The difference with proof of work is tremendous. Any proof of stake protocol certainly makes the energy expenditure problem essentially disappear, at least at the level we’re seeing right now with Bitcoin. That’s only one dimension, though. Energy expenditure is not the only issue that blockchain systems have.
VentureBeat: If they do that, do they trade off something like security?
Kiayias: At the abstract level, you can think of it as a different security assumption. They’re both secure. But if you look at the theory of security, security is always achieved under certain assumptions. Or to put it differently, it’s very rare to have a system that has unconditional security, as we say. There do exist some very simple systems in the history of cryptography that are unconditionally secure, but they’re extremely limited in applicability. Typically what you have in security is security proofs or security arguments that are conditional upon certain assumptions or certain behaviors or certain things that you’d consider plausible.
Proof of stake or proof of work, they come with different assumptions. They’re both conditional, I should emphasize. But the set of conditions are different. This doesn’t simply mean that one is less secure than the other. In both cases, the conditions that you can argue — of course, I’m not talking about Ethereum specifically now. I’m speaking very broadly about abstract, ideal proof of stake design. Both of these systems can be argued convincingly to be secure under a plausible set of conditions that are different in both cases.
VentureBeat: I’ve also heard a very different argument about how the global financial system as it can be very wasteful. That physical banks use a lot of energy, paper-based systems use a lot of resources. The comparison between that system and a system based on cryptocurrency seems like there is a big difference there. I don’t know what you’d think of that.
Kiayias: I’ve seen this argument as well, but I don’t buy it. Bitcoin, just Bitcoin, cannot substitute for the world financial system. A bank is not just a ledger. They have a whole infrastructure that includes customer service, backup systems around what to do when things go wrong. It’s endless. There are a lot of other items there. It’s possible to make such a comparison, but the places I’ve seen this comparison being made — it’s too simplistic, comparing a brick and mortar world that includes things like customer service with just a ledger. That’s not realistic. Bitcoin, the ledger, is by itself insufficient as a drop-in replacement for the whole banking system.
VentureBeat: I guess it’s more of a comparison between centralized financial services and decentralized finance.
Kiayias: Yes, that’s true. A comparison like that could be made. But I haven’t seen it being made in a convincing way. And I should say, even if someone makes this comparison convincingly, why not use less energy? Even if Bitcoin is more competitive energy-wise, we should still ask the question, what’s the absolute minimum of energy we need to get a service like that? Just because Bitcoin is “better” than System X, that doesn’t mean — the question here is not just what system is better, but if you want to do the job that System X does, what’s the absolute minimum amount of energy we need?
This is the way we ask questions in computer science. Computer scientists look at questions like this. The problem, let’s say, is sorting an array. The question is, what’s the minimum number of comparisons you need? It’s not about finding one algorithm and proving it. It’s finding the best possible algorithm that does it. I’m keen on doing this. This is what motivates my research and the research we do at Input Output. Certainly I think this is the right question to ask.
VentureBeat: I wrote about Ubisoft’s effort to bring NFTs into their games recently. They said that they were using Tezos, and that it was a lot more energy efficient. A transaction in Tezos was using a millionth of the energy of a Bitcoin transaction, so you don’t have the gas fees. It was more like the equivalent of a couple of Google searches. It sounded good, but it seemed like the problem is that not many people are going to use that protocol.
Kiayias: Tezos is a proof of stake system, so these numbers are not surprising. Bitcoin is immensely more energy-hungry compared to any proof of stake system out there right now. In terms of the infrastructure, from the point of view of the end user, these things shouldn’t matter too much. The end user tries to play a game or tries to exchange some artifacts they have, some art. Where the user does it is something that many end users are not too concerned about themselves.
But what are concerned about here, as far as the basic infrastructure question — what is a sound infrastructure to base the security of these transactions upon? This is the question that motivates the work we’re doing. This is the right question to ask. There are plenty of systems out there, but the real question to ask is, are they secure? Have they been analyzed? What are their credentials? We’re still at the very beginning of assessing system security in the blockchain space.
VentureBeat: Do you worry that we’re already wed to Bitcoin and Ethereum to the point where we might not be able to change?
Kiayias: No, I don’t think so, to be honest. We’re still very early. We’re exploring so many different ways of doing this. There are a lot of things that everyone in the space is learning. We’re still way too early to say that somehow the first mover advantage is going to eliminate possibilities for other systems beyond Bitcoin and Ethereum to be successful. There’s certainly a lot of room for that.
You could even imagine a setting where there’s a multitude of systems that are all interoperable, with [untrustworthy] bridges connecting them and the ability for people to seamlessly transfer assets between systems, without actually caring about how it works. If you look at the internet itself, it’s a connection of quite diverse networking backbones, but we don’t care now. The packets coming from my machine reach yours and vice versa. Everything is happening seamlessly in the background because the internet infrastructure has been optimized to work like this.
This is a viable future for the blockchain space. You have a lot of systems that interoperate. Eventually, what you expect is that some of the systems will go away and some of the other systems will grow, depending on their ability to scale, have sound economics, and interoperate with existing systems and legacy infrastructure. That’s very important. You can’t imagine this technology in complete isolation. It must interoperate with existing infrastructure and financial systems and so forth.
VentureBeat: Do you think, for things like NFTs and games, that there’s an obvious solution yet, an ideal protocol?
Kiayias: I should say there’s a lot of research to do even in the NFT space. The basic backbone of what is an NFT is well-understood, and there are systems that can give you that. I have to point out, however, that I’ve also seen a lot of subpar implementation of the NFT concept. In other words, even though the expertise is there around how to provide the basic NFT, it’s a bit unfortunate that I also see a lot of insecure implementations of that concept in different platforms. However, at this point in time, there are systems, Cardano included, that can give you a sound implementation of the NFT concept. They can be readily used by those that want to use such systems.
VentureBeat: If blockchain overcomes the energy challenge, do you think that’s the main challenge that it faces in adoption? Or do you think there are other challenges, other problems that have to be overcome?
Kiayias: No, there are more. There are definitely more. There are a few different ones that require expertise from different areas. Certainly energy efficiency is obviously one of them, but then we also have scalability. The work that we hinted at the beginning of this conversation with Stanford has to do with scalability. Some of the research that the team at Stanford that we’re funding through this gift, it’s working around this next generation of scalability for Layer-1 operations. Layer-1 is an ever-expanding database. The question is, is it possible to have small, finite nodes to support that infrastructure without sacrificing the security of the system?
So far, blockchains like Bitcoin, Ethereum, and others, they’re quite monolithic in what they consider the concept of a full node. This is something that knows everything and checks everything. Obviously, by itself, this is not scalable in the future. We’re talking about a never-ending, ever-expanding database. We definitely need to solve that problem, and without a lot of work, a lot of research, both within Input Output and with partners like Stanford — there’s a lot of work we’ve done with others confronting the scalability problem.
Meanwhile, in all of these systems, you self-register because you’re incentivized to do so. There’s a lot of research that still needs to be done to validate the soundness of the mechanisms that these systems use to incentivize the participants. For example, you can see in recent times all the debate that exists around pricing transactions. There are big issues in Bitcoin, and Ethereum as well, but Bitcoin has transactions which are extremely expensive. You can start asking the same principal questions. What’s the best way, if you want to auction this desirable space for transactions on the blockchain — what’s the best way to price it so that you can still not break the incentives of the system participants?
These are just two examples where we do active research. There are lots of open questions to solve.
VentureBeat: Occasionally I also hear that quantum computing is going to be a threat to blockchain. It seems like it could also be used to defend blockchains. I don’t know how serious a problem that is.
Kiayias: We take it seriously, very seriously. It’s definitely not feasible at the moment with the quantum computing capabilities that exist right now. It’s still an open question as to how well these techniques are going to scale. But it’s a very serious concern, and we have to understand how to develop protocols that, as we call it in security sometimes, are post-quantum secure. How can you develop a protocol that, after a quantum computer exists, still retains its security?
The good news, and perhaps something that people misunderstand sometimes, is that you do not need a quantum computer to be protected from a quantum adversary. It’s possible to develop classical algorithms, classical cryptography techniques, that are secure even against quantum attackers. That’s something we’ve demonstrated in other areas of security, for example secure communications between websites, clients and servers. It’s something that we understand how to do in a way that’s post-quantum secure. Bringing this technology and understanding the right technology for the blockchain space is an ongoing research effort. I’m quite active in this myself right now, together with my colleagues, but there’s a general effort toward making blockchains post-quantum secure. It’s something we take seriously, but it’s definitely within the realm of feasibility for the next few years, to have blockchains which are completely quantum safe, so to speak.
VentureBeat: What’s your feeling about the potential for the decentralized internet, decentralized web, versus what we have now that’s centralized around big tech companies?
Kiayias: I’m very enthusiastic about this. This is going to be one of the best applications of blockchain technology. Right now, what we observe is that all this centralization around the big corporations that basically silo a lot of information — in many ways it can be argued that it should be more of a public resource and less of something that one specific company should be able to capitalize on. There are a lot of issues of basic human rights. Do I have a right to see what information is collected about me? Do I have the right to transfer my information? Do I have the right to erase some of the information that’s collected about me? These are basic questions that concern people in the IT law space, the legal aspects of information technology.
Blockchain systems do provide a lot of tools that can be used to make this situation better from the point of view of regulation. These ideas sometimes are called reg tech, regulatory technology. These are techniques that could be very useful in the future, and could upgrade the way we do regulatory compliance. Let’s say regulatory compliance could catch up with the times. I’m very optimistic about this. Some of the regulations we use right now are very antiquated. We’re in a world where big corporations can just do regulatory arbitrage. They have a department in some jurisdiction where they operate because it’s advantageous for them to be there. It’s a perversion of how the system should work on a global scale.
I do think that building these applications on top of a substrate of blockchain technology could somehow elevate the internet into something that has memory, something that has the ability for users to engage in a neutral space, without being locked into a particular company. This is a very promising direction for blockchain technology, and I think that’s going to have a big impact on what we do in the next few years.
VentureBeat: Do you think there’s some limited form of decentralization that’s more ideal than complete decentralization? Do we need to form many DAOs to replace companies, things like that?
Kiayias: It’s a great question. What’s the right level of decentralization for a particular type of application or system? I’m very confident that there’s going to be a wide spectrum. We cannot decentralize everything. Not everything makes sense to be decentralized. We still want to have services that operate as centralized entities in one way or another, just because there are needs for peak performance or agility.
Decentralized systems, no matter how you design them, are highly distributed. Their responsiveness will always be beaten by a super efficient, optimized centralized system. As the saying goes, the benevolent dictatorship is the best system that you could ever have because there’s only one dictator, he acts in everyone’s best interests, and he can act immediately and solve every problem without any delay. The only problem is that there’s a scarcity of benevolent dictators.
That’s something we can solve with decentralization. We’ve solved it historically with democracy. As we can see in the way human societies have evolved over thousands of years, they’ve moved to settings where you have some centralization. You have a president or a prime minister. But you also have decentralized components of operation. You have elections. You have hierarchies of management. You have separation of duties, separation of parts of the government. This is not new. If you study political systems you can see a diverse landscape of some decentralized processes, some centralized, and a lot of checks and balances that glue everything together. I think exactly the same thing is going to happen in information technology.
VentureBeat: What are the areas of research that you’re most excited about? What do you think is worth a lot of your time right now?
Kiayias: At this particular point in time, I’ll mention scalability, which I’m working on very actively with the team at Input Output. We have a lot of questions about how to optimize these functions. Making the system scalable, it also has to be agile because different use cases on top of a blockchain require different types of operations. You want to create a system that somehow shapes itself according to a particular use case. Scaling for the occasion is always an important concern. There’s a lot of research going on about this right now.
I mentioned economics and game theory. Another topic I’m working on actively right now with the team is governance. I can’t emphasize this enough. Sound governance of a decentralized project on blockchain systems that are live is extremely important for their long-term success. One of the biggest problems we’ve seen in the space so far is systems getting into trouble because they can’t properly manage the way that the system evolves. It’s impossible, if we look at the history of software systems, to have the perfect system that stays there forever. What we know instead is that, first of all, bugs do happen. They have to be patched and corrected expediently. At the same time, circumstances do change. You have to be able to adapt. Governance and software updates in the decentralized setting [are] an extremely important questions [to answer]. It’s something we’re very actively working on. So, those are three examples of the top research streams we have going on right now.
VentureBeat: Are there any subjects where you’re worried about the state of things, the direction that we’re going?
Kiayias: In the long term, nothing specifically. The whole space is maturing rapidly. We will be able to solve the main questions. I’m very optimistic about the future, about the whole direction we’re going. I see a lot of bright people in the industry space. I see a lot of good expertise participating. I believe all of the major questions will be solved, from a technological point of view.
About the social aspects, one issue that worries me is that a lot of the research and a lot of the development we’re doing is driven — collectively, the whole blockchain space — by computer scientists and software engineers. We know from the history of recent information technology services like Facebook that you can do things, if you don’t have an interdisciplinary approach of understanding the questions that you’re trying to solve — it’s possible to create systems that can do a lot of harm. We’ve seen this, in the case of Facebook, with the spread of misinformation that has hurt public health in some cases during the pandemic, as well as in the case of Myanmar. There are a lot of cases where well-intentioned technology development has led to adverse effects.
What I’m trying to do, and something we’re striving toward at Input Output, is to promote interdisciplinary work and research. That’s something I look forward to being more active with in 2022 and further on, so we develop solutions that really solve the important problems we want to solve, without creating new problems as happened with the hasty development of information technology services that we’ve seen in other cases, like Facebook as I mentioned.
VentureBeat: Do you have some confidence that, say, within five years we’ll be able to solve the energy usage problem? Can we get to an ideal protocol?
Kiayias: First of all, I think energy usage is something that we’ve taken care of already. Cardano and other systems are going in this direction. We have a sound infrastructure that is not energy-hungry. But as for all the other questions because there are many other questions — governance, as I mentioned, is a key question. Scalability in all use cases is a key question. The next five-year window is enough time to develop systems that are resilient and reasonably capable of evolving so that they are exceptionally long-lived. I’m confident that the research and development we’ve done so far, and that’s going to happen in the next five years, will take us to that point.
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