Proof-of-work System - Reusable Proof-of-work As E-money

Reusable Proof-of-work As E-money

Computer scientist Hal Finney built on the proof-of-work idea, yielding a system that exploited reusable proof of work ("RPOW"). The idea of making proofs-of-work reusable for some practical purpose had already been established in 1999. Finney's purpose for RPOW was as token money. Just as a gold coin's value is thought to be underpinned by the value of the raw gold needed to make it, the value of an RPOW token is guaranteed by the value of the real-world resources required to 'mint' a POW token. In Finney's version of RPOW, the POW token is a piece of hashcash.

A website can demand a POW token in exchange for service. Requiring a POW token from users would inhibit frivolous or excessive use of the service, sparing the service's underlying resources, such as bandwidth to the Internet, computation, disk space, electricity and administrative overhead.

Finney's RPOW system differed from a POW system in permitting random exchange of tokens without repeating the work required to generate them. After someone had "spent" a POW token at a website, the website's operator could exchange that "spent" POW token for a new, unspent RPOW token, which could then be spent at some third party web site similarly equipped to accept RPOW tokens. This would save the resources otherwise needed to 'mint' a POW token. The anti-counterfeit property of the RPOW token was guaranteed by remote attestation. The RPOW server that exchanges a used POW or RPOW token for a new one of equal value uses remote attestation to allow any interested party to verify what software is running on the RPOW server. Since the source code for Finney's RPOW software was published (under a BSD-like license), any sufficiently knowledgeable programmer could, by inspecting the code, satisfy himself that the software (and, by extension, the RPOW server) never issued a new token except in exchange for a spent token of equal value.

Until 2009, Finney's system was the only RPOW system to have been implemented; it never saw economically significant use. In 2009, the Bitcoin network went online. Bitcoin is a proof-of-work crypto currency that, like Finney's RPOW, is also based on the hashcash POW. But in bitcoin, double-spend protection is provided by a decentralized P2P protocol for tracking transfers of coins, rather than the hardware trusted computing function used by RPOW. Bitcoin has better trustworthiness because it is protected by computation, RPOW is protected by the private keys stored in the TPM hardware, and manufacturers holding TPM private keys (or hackers who stole a TPM manufacturer key) could subvert that assurance. Bitcoins are "mined" using the hashcash proof-of-work function by individual nodes and verified by the decentralized P2P bitcoin network. The other novel aspect of bitcoin is that it dynamically varies the hashcash size required to create a coin to avoid inflation due to computers getting faster, and due to more users mining.