Board of Directors vs Mining Pool Operators

[etherbroker]

What is the motivation for signing the blocks?

Is it just like a civic duty? 

If there is a pay, is it profitable, like a business, or just something to do and maybe pay your electricity bill.

Just curious.  Always wondering about how to appeal to more people.

[bytemaster]

Some other threads were getting rather long so I thought I would summarize where they went and the latest insights:

My real challenge with securing the network is that I know several things for certain:

1) Proof of Work is not just unprofitable, it results in the worst kind of centralization and control.
2) Proof of Stake systems are more experimental and only Nxt has a pure proof-of-stake system.
3) Ripple is a form of consensus where you trust a set of nodes not to collude, but where growing this set of nodes from 5 nodes all controlled by Ripple to 1000's of nodes in a manner that doesn't fork the network is an unresolved issue.   Effectively Ripple is a club that gradually adds members and these members collectively agree to reach consensus.   Ripple uses a complex algorithm for this club and if the core members of the club go one way then the shareholders (XRP) have no say. 

So I am sitting here trying to innovate solutions that are better than everything that has gone before and this involves deep thought about the nature of the problem, the risks involved, etc.   Fortunately the DAC metaphor gives us the answers we need.

1) We want to give shareholders a way to delegate their vote to a key that doesn't control their coins 'so they can mine'.
2) We want to maximize the dividends shareholders earn
3) We want to minimize the amount we must pay people to secure the network.
4) We want to maximize the performance of the network
5) We want to minimize the cost of running the network (bandwidth / CPU / etc)

So the key is that the shareholders remain in control.  If they remain in control then it is decentralized and as much as I hate voting on anything, when it comes to shared ownership of something like a company it is the only viable way.  Fortunately if you do not like who is running the company you can sell and this market feedback causes shareholders to vote more rationally than citizens.   

So every shareholder gets to vote for someone to sign blocks in their stead (a representative if you will).  Anyone who can gain 1% or more of the votes can join the board.   The representatives become a "board of directors" which take turns in a round-robin manner signing blocks.  If one of the directors misses their turn clients will automatically switch their vote away from them and eventually they will be voted off the board and someone else will join the board.  Board members are paid a small token to make it worth their while to campaign, put their neck on the line, and ensure uptime.  They also post a small bond equal to 100x the average pay they receive for producing a single block.   To make a profit a director must have greater than 99% uptime. 

So how is this different than Bitcoin?   In bitcoin the users must pick a mining pool and each pool generally has 10% or more of the hash power.  The operator of these pools is like a representative of the clients pointed at the pool.   Bitcoin expects the users to switch pools to keep power from becoming too centralized, but collectively 5 major pools control the network and manual user intervention is expected if one of the pools is compromised.   If a pool goes down then the block production rate slows proportionally until it comes back up.   Which pool one mines in becomes a matter of politics.

Therefore, I am expecting the same kind of behavior from users of BTS X except instead of having to point their hashing power at a pool, they merely change a setting in their wallet.  This setting can even be setup with a chain of command so that users do not have to think much about it.  Instead of only miners voting, everyone can vote.  Like bitcoin, if a representative goes down, block production will slow by a proportional amount until the representative comes back on line or users vote them out of office automatically.

The reason to avoid randomly selecting the representative from all users is the following:

1) high probability they are not online
2) attackers would gain control proportional to their stake without any peer review...
3) without any mining at all, the generation of a random number in a decentralized manner is impossible and thus an attacker could control the random number generation.

The benefits of the representative approach is that:
1) After fewer than 20 blocks ( 10 minutes or less ) almost everyone has indirectly ratified the block-chain through their representative in an immutable way.
2) block production can be much faster
3) no one can prevent transactions from getting included in the chain for more than 10 minutes... compared to bitcoin this is HUGE.

So from the perspective of decentralization I believe I have a design which achieves more than Bitcoin, Nxt, or Peercoin can hope to achieve with a much higher level of security in a much more rapid manner than previously possible. 

Here is the critical point that separates this approach from everyone else:  we do not separate control from the shareholders.   Any Nxt node that is not on line loses their influence.  Any peercoin node that doesn't have some mining power has their vote diluted.  Any Ripple user has no say over who controls unique node list.

Decentralization with bonded representatives subject to immediate and continuous recall.   Efficiency of Ripple and more decentralized than any POS coin.