We’re joined by Igor Barinov, the tech lead of the POA Network. The POA Network achieves a reduction in transaction costs by many orders of magnitude by having a set of trusted validators. All validators must be US public notaries, so their identities are known and legal recourse against them can be taken in the offchain world. We also talk about the xDai network, which enables Dai transactions on a POA chain: Dai are transferred into a smart contract on the mainnet and then become available to be transferred at much lower cost on the POA Network. Similarly, they can be transferred out of the xDai network and become available again on the mainchain. We talk about use cases, governance, and limitations.
Topics we discussed in this episode
- Igor’s background and how he got into blockchain
- The POA network setup and how to become a validator
- What informs design decisions and how to find suitable notaries
- The consensus mechanism on the POA Network
- The role of the POA token
- The xDai network and its purpose
- The role of the DPOS token
- Use cases of POA and xDai Networks
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Friederike Ernst: Hi Igor. Thanks for being here today. So to start things off, can you tell us what your background is and how you got into blockchain? Hi.
Igor Barinov: Hi, my name is Igor. I’m the Tech Lead of POA Network. My background, I have an education in computer science. I worked all my life in IT, most of the time I worked in Enterprise in mobile operators. I got interested with blockchain with Bitcoin and cannot stop since then, it’s quite easy. And from Bitcoin to Ethereum and from Ethereum I decided to stay with Ethereum a while because I think the most exciting development that we have for the last four years.
Friederike: What was it that caught your interest in Bitcoin.
Igor: Before Bitcoin we participated as a team in a distributed protocol. So if you if you remember Boink where safety at home and some other distributed data processing algorithms and we participated in this and when I first time heard about peer-to-peer electronic care system, I got excited and actually what we’re doing now with our XI development is bringing this electronic peer-to-peer care system for the real world application with wire speed and transaction price and programmability which is very important for for electronic money. So the idea is even then you don’t understand that when you understand that money can be free and it’s very exciting. So that’s how I started. It was quite hard to get, let’s say a job before Ethereum time in blockchain space, so I worked with multiple blockchain companies and participated in like all hackathons even before blockchain hackathon were like a term right like just you just come to a hackathon and you explain what passion is to judges and and after you build something can show it to them, and after I worked as a consultant for a Singaporean company called Acronis and built some let’s say smart contracts and tools around them and after this consulting I started POA and working with POA since then,
Friederike: You started working with POA from the get-go. So you’re one of the founders but you don’t you don’t call yourself that you call yourself the Tech Lead. Why is that?
Igor: We don’t call ourselves founders and we don’t have C titles. It’s a form of organization. We decided that all of us are like contractors to the network and to the protocol. We had some initial roadmap and white paper and ideas about how to make a protocol scalable this way and how to build tools which are not available for this type of protocols and we decided that we contribute our resources towards this idea and when you work in, you know in open source field, it’s easy to be a developer and to be a builder than to be like a CEO and and so forth, right? So we’re not selling our products. We don’t have this in our commercial department, business development and so forth. Yeah, so that’s why we don’t have a C titles. Technically there are some C titles because it’s required by regulation for some operations, but we don’t use them internally or externally and we have quite a flat structure within the team.
Meher Roy: So do you have a corporation that’s actually building the things or is it just a DAO?
Igor: Yeah, it’s it’s quite a common legal structure when there is a foundation which holds some crypto assets and vibrational company which is building stuff and not even one operational company, multi operational companies and external partners and technically it was within the legal field. And that’s right. We’re not operating only as DAO because it’s quite hard to say to pay AWS bills right with as a DAO. You have to have a company to pay from. The same with you know with people and other expenses.
Friederike: I get why you don’t have a CEO or other C titles towards the outside, but how does the governance inside POA actually work because someone actually has to decide which direction to march in right?
Igor: Yeah, we’ll have 2 fund managers who decide how to spend funds and depends on the situation. Let’s say 4-5 team leads and we have consensus team. We have our open source blockchain explorer team. We have a token bridge team and the dapps and all other tooling right? So I have 4 team leads and then teammates are working with external and internal resources, but we all contractors for this project. Right? So we don’t have like, okay these people are employee and you know, these are contractors and this external contractors. We all decided that we’re all contractors, but with some different decision-making abilities and in different fields,
Friederike: This is very interesting. But before we go deep down into how the governance of the network works, could you just tell us what does the POA Network do and you have another network which is the xDai network? Well, what does that Network do? And what’s the vision for each of them?
Igor: It’s changing from like from from time when we originally thought about this idea if you remember the like the April Fool’s Day post by Ethereum Foundation written by Vitalik when he he said that Ethereum mainnet is migrating to POA consensus. He said this back and days and it was a joke, right? And the first time when we discussed public permission network with real value based on Ethereum protocol people thought like it’s stupid to make right. First of all, it’s a centralized which is a strong argument that it’s hard to argue about it, second is that it’s not secure right at because proof-of-work secure and other especially with you know, this type of consensus with like exclusive group of validators are like not secure at all. So that’s what people think right. It’s not that I think. Third was it started as an experiment. Like why do we need this experiment to make the protocol which is like Ethereum protocol more accessible to people and let people experiment with this protocol for their own needs. POA network basically have different consensus algorithm, different set of validators, different reward structure, but the same basic client without any hardcore changes for developers. So it’s quite easy to jump from network-to-network. Right? And the the xDai is if we think about this it’s very new experiment because this network is actually the first stable chain the chain with a stable native token without any initial emission without any supply of this stable token. So all native tokens of the on this network are breached from mainnet to xDai. So it’s a new concept the theoretical concept of hard spoons are known for for for a couple of years but xDai is the first hard spoon with a stable token, which is not competing with Ethereum, right because the stable token home is on Ethereum. So that’s that’s kind of experiment that we made within this xDai Network and you know people love to use it. I think that it was not possible within the Ethereum mainnet network and setting so we had to have had to make it somewhere outside. So that’s that’s the main reason to exist and besides building networks it’s important to build the link. If we think about Ethereum ecosystem some tools are not available for for side chains and forks before it was like Infura which was not available STO supporting quality mainnet and testnet, and Etherscan which is not supporting competing networks. 3 very important tools for developers not supporting competing projects let’s say right so that’s that’s why we decided to spend our resources to build at least 1 tool and our blockchain explorer we hosted for 12 networks and there are around 20 networks using this blockchain explorer. So that’s our contribution to the ecosystems and we like Ethereum ecosystem. And we you know, we we basically staying here and building tools which can be used on mainnet, can be used on side chains, that’s idea of POA as a protocol right, allow people to experiment, build tools and make this protocol, you know scalable. Scalability nowadays is not that important like it was 2 years ago, now people are asking more about use cases, and the questions are changing from year to year, right.
Friederike: So let’s talk about the POA Network first. It’s a proof of authority network. So there’s a number of validators in this network. How does one become validator in this network?
Igor: Now we slightly renamed it, we called proof of autonomy because we think that it’s a network based on DAO, like it’s exclusive DAO by validators and exclusive means that there is a limited group of people who can make decisions within this DAO, and and they can let new validators in or they can let out validate or something later. So the each POA network starts from a trusted ceremony. So there is a boot statement of this network and we have a special rule called Master of Ceremonies. So this role boot statement new network and onboard minimum required number of all validators who will onboard new validators through the governance process, right? So POA network started with one Master of Ceremonies and three first validators. After that validators received a governance instrument, which we called voting tab where they can propose ballots and each validator can proposed ballot to add or remove a validator from the network and there is a quorum decision by other validators with equal votes to unboard new validators. So to be a new validator usually validators apply on the forum or they can apply somewhere else, but how it started they apply with their application and there are some requirements and there are some requirements which limit the number of subsets of potential validators from the subset of all people but you know the subset which can be validated is quite big. And it’s also interesting that validators of POA are individuals and as far as I know is the only network which is managed only by individuals not company. If you look into any other proof of stake or POA consensus it’s usually it’s a form of consortiums of companies or financial organizations or some if in proof of stake it’s more likely a professional companies, which are providing this staking services basically, right and POA is a network managed only by individuals.
Friederike: So what happens if a validator misbehaves what happens if they acted maliciously, do they have to stake some funds that can then be slashed or how do you how do you make sure that they behave in a way that benefits the network as a whole?
Igor: Yeah, we think that well there is a way for for for other validators to remove a validator from the consensus. So any validator can propose a ballot to remove a validator from the consensus. Usually misbehaving in POA is when validators for some reason is not running his or her node, right? So let’s like that’s a common misbehaving that we that we saw during these two years then for example they forgot to pay for the bill or because of the misconfiguration. Let’s say parameters of their node is too low and so forth, right? So validators can vote out a validator and we had multiple examples when validators voted out other validators, but the good thing here that the consensus can tolerate a number of faulty notes and even if 1 validator is misbehaving it’s not a problem, right because the consensus is fault tolerant. Now validators have this governance application. This application is a part of the consensus. So it runs within smart contract and smart contract is connected to the consensus layer.
Meher: And I read that validators in order to be a validator you have to be a U.S Notary. Is that right?
Igor: Yeah, that’s right. That’s that’s right. And some people ask why and are there any other questions regarding that?
Meher: Yeah, why U.S notaries, why specifically that?
Igor: Okay. Because first of all, it’s a great way of making KYC on validators, right? We when we think about individuals, what is the best way to get KYC. When people apply to be U.S notary government is the US government on state level it’s making KYC checks on applicants and results of this checks are publicly available. So also validators are taking some public responsibilities, provide services and they cannot decline providing their identity to any third party who is interested in cross validating identity, right? If you ask a validator of any proof of stake network to confirm their identity, they can do this or not because it’s on like for you as a concerned token holder. With with POA validators you can ask to to make a not really related document from this validator and this way you can cross validate their identity, like you can actually ask them to notarize something for you. It’s outside of the protocol, but this way you can cross validate their identity. But also because validators are individuals it’s interesting to understand, you know, what’s their background especially as a validator I don’t want to have other validators from like some like social groups. For example, I don’t want to see criminals as validators and notaries cannot have a previous criminal record. So that’s also a good way to to prove and also notaries are regulated like state by state so there is no organization in the US which can say, okay guys, you are not US you cannot do this, right? So it’s regulated state by state that is diverse group of validators from different states, which is good for decentralization, when we think about this. Well, when people are notarized they already agree to share information about themselves including their like residential address in public so you can you can validate a residential addresses of all validators. Why the US notaries? It is because we thought that can be interesting use case for a US based network and till now the POA network is as far as I know, it’s the only US based network which is like all validators are US based and its public networks with public token. It’s a good experiment. We thought that this type of network can be used with some local specific use cases. For example, if some local or federal authorities will be interested to put some information on chain without that the POA Network can be an advantage. It didn’t happen. But yeah, it can be.
Friederike: So how did you find a number of computer savvy technology forward notaries who are interested in being a validator and how do you incentivize them to be one?
Igor: Yeah, that’s with first validators it was quite hard, right, especially for the first one so I presented on Ethereum meetups, I’m co-organizer of Silicon Valley Ethereum meetup, so I presented over there. It’s actually when I announced the project and a few validators applied to be validated after my presentation. And after I visited conferences and meetups and usually from from one presentation we had like one candidate. Yeah, that’s that’s how it started and after it was easier because you know, when the project received some some hype and and also when the token started to be dictated publicly validators had clear incentive. So we designed the protocol that the way that each each block one coin is created and the this coin is going to validate who created this block, right? So all validators are incentivized by the protocol to make their how we call it a public duty by private actors, right? So they’re private actors, but they’re doing public duty by you know participating in this participating in this type of DAO, right? It’s exclusive DAO because it’s a limited group of validators but it’s still decentralized autonomous organization. And one more thing with with individuals. It’s quite interesting that individuals they cannot buy each other right like legally. Companies can can can form some, you know can buy shares of each other companies, they can exchange tokens and so forth, right? So individuals are atomic units while validators agreed that they will not form relations and we had one validator who invited his girlfriend to be validated, but after they decided to be a family he stepped out and now only she’s a validator which is quite cool, right, but she’s keeping the social rules. So they agreed not to form families between validators or if a family is formed like one of well data should quit or both.
Meher: In the US legal language there is this concept of an unincorporated association or an unincorporated partnership. So this is like a collection of individuals that is doing some activity, but they have not incorporated in any of these legal structures like LLC, SCorp, CCorp etc. The thing is if you are incorporated partnership or association and if there’s ever a legal lawsuit against that association, then the members of that association are individually infinitely liable if something goes wrong in that lawsuit, so don’t your validators worry that this kind of organization where there are identifiable individuals with their records accessible if let’s say there was a hack of the POA Network and people lost a bunch of your tokens or xDai tokens or whatever then all of these individuals are going to be legally liable for that event.
Igor: It’s a it’s a good question. We don’t know about lawsuit against this type of formations. The first question. I asked myself when I started to design the protocol was is it even legal right for for individuals to create their own basically tokens and protect someone else’s resources, and that was my first question and I remember when I asked this question, my perception was like I’m doing something wrong because I thought it was not possible to do something like this, but they explained that it’s totally feasible and there are no legal risks. The same question was with with our bridges product which can allow individuals to transfer tokens between networks. Like is it legal to transfer tokens. So validators can be can be legally binding to lawsuits if like whatever they are doing is against let’s see token holders, right if they like collude technically, it’s possible and from my perspective as a protocol designer I think it’s great. Right? So it what protects this DAO from colluding because they understand that they’re publicly exposed persons and the they taking this responsibility. So we call identity at stake. So like most of the validators they already, you know, they’re people with their own like families and their own lives. They don’t want to risk this status quo and they actually they understand what they’re doing and they agree on this. It’s interesting that we have we have different professions, some people think that most likely all of our validators are US notaries, but not in the US. It’s like a separate way of it’s not it’s not a job right for most people. It’s just like additional source of revenue for most people. So there are different backgrounds. There are software engineers, business owners, and also there are lawyers, right so lawyers understand what they’re doing and I think that they understand, but theoretically they can face a lawsuit and that’s like anyone can face a lawsuit.
Meher: Of course. This is a question that is not specific for just POA. So like a few months back, I was talking to one of the one of the largest investors of Maker DAO, and they were talking about these designs of these committees, you know, like the stability fee committee and this fee committee and that fee committee and committee members there are individuals and they have similar risks. Now if you’re in a committee and you jack up the stability fee and somebody like loses money because you jacked up the fee too high or too low, what protects you from a lawsuit there?
Igor: Yeah. Yeah. I understand. We worked with multiple lawyers on legal opinions on our products. Actually it was good to see Stephen Palley on here on your podcast. We were a client of him. So I understand that that’s possible. I’m not a lawyer. I cannot guarantee, you know anything to the people participating, and it’s it’s possible that I made a mistake when I designed the protocol and validators had many questions, for example, like how to make you know, they’re all Americans right? Well not all Americans, all US residents because you can be notary in the US without being American. So we have a few Canadians and and one Russian citizen but they are US notaries and they participate in the consensus. So the question is like how to how to tax revenue from the from the consensus and in some networks some people don’t care because they came an entity and they don’t care but here all validators are exposed and it was a question on the they had long discussions about this and well tax season ended so I hope validators made it right.
Meher: And would you want to extend? So right now only US notaries can be validated but in principle, you could allow German notaries to be validated as well. And would you want to extend this geographically or will keep it limited to the US?
Igor: So the idea of side chains is that we can if we think about scalability and scalability not only about transactions per second, but also about like use cases and road map of the network, we can extend it vertically right so we can we can think okay so US validators are not enough. Let’s add some some others with their own problems. You know, let’s add some European validators with a GDPR or we can we can we can make horizontal scaling and we can say yeah, this model is interesting in the US, but let’s have a network with you know, European validators and so forth. So that was our like first idea about validator set, and I think that POA validator set is unique and it’s good to keep it as it is, right, like US based network with this notaries validators and if you want to experiment we can start a new network with the new set of validators with xDai, we started with network with basically with Maker DAO, with 2 validators, POA and Maker DAO, now have 10 validators and different companies, organizations from different countries. No individuals at all. Like all members are organizations. Some of them are DAO like MetaCartel, some of them are companies like Purism and and so forth. So that’s the way right. So if you want to to have the same consensus, but with a different set of validators we can launch one more network and there are multiple networks launched or plan to launch on the same consensus and governance model like Ocean Protocol, Luxor, Artist Network from Austria, several networks launched on the same ideas and the validator set is different. And also they experiment for example Artist Network, they have validators with the same governance structure, but validators should put a bond right? It’s not sticking they have should put a bond if they put a bond they can be a validator then be onboarded by the validators, which is which is quite cool, right because it creates a locking mechanism within the token economy, which is good for for token holders.
Friederike: So what all of these networks have in common is the consensus mechanism. Can you explain how that works?
Igor: The main idea is that there is a there is a set of validators which is managed by by smart contracts by DAO, right? And this is known as a simple protection mechanism because if we if we understand who the validators are and why they can create block we can understand if the network is operating under some assumptions of protection. For example in proof of work, if you have more power you’re a validator for this block and well more power and you’re lucky to create a block. In proof of stake there’s a set of stakers who have more coins than than any other people from the subset and in proof of stake there’s this set of people with more tokens than anyone anyone else staked and also there’s a delegation people who delegated. In POA there’s a set of people who are selected by subset of this set and the whole set can manage this set by excluding validators or including them based on DAO decision. So the governance is based on DAO and the main question on validators is deciding on who are validators. So this is a part of control. So second important part is reward distribution, the protocol distributes rewards to validators. It’s embedded within the protocol and validators also have what we call self sustainability mission. So some missions they can spend on the protocol to support R&D and so forth, but the underlying consensus can be swapped for the now for now we’re using Oracle which is developed by Parity Technologies, and we plan to migrate to a new censorship resistant consensus in 2020. So that’s our plan. Well, I’d say it’s quite quite easy thing because when we think what is more important, what is the most important for POA consensus, the answer to the question is who validators are and why validators are these keys right because they were voted in by other validators.
Friederike: And when you upgrade the network say when you switch to the honey badger protocol next year, will all validators actually have to agree with this upgrade or how do you follow through on this?
Igor: Once a year, we have a security incident which can be like incident type of consensus fault. So we have to upgrade protocols. It’s because some problems with an implementation of let’s say a Parity client or some bugs in the Ethereum protocol which can cause this problems. So at least once a year, we have to propose updates to validators and they have to agree on this. So this type of upgrades are usually proposed like, you know in emergency forums of for validators, we don’t have much time to think about it. Most of the time the upgrades are proposed for the test network and after the test network, they propose to the POA main network in the form of hard forks or protocol upgrades to validators. Some of them have software engineering background. We have validators working for Amazon, Facebook some other companies. They can review some changes and agree on this changes or not. If we proposed upgrade of the of the back of a consensus, which is known they will upgrade it, but let’s say if we propose I don’t know switching from POA to DPOS, it will be very different discussions. So most likely they will ask many questions and I don’t know outcomes of this decision by validators. That’s that’s not my network, right? That’s their network
Friederike: Sure, can anyone propose changes or who has the power to propose changes to the to the protocol?
Igor: Technically yeah anyone can propose changes so validators themselves can can can make their own changes. This zebra control and reward distribution part supports upgradability through smart contracts so implementation can be uploaded to anyone in the form of a smart contract and validators can vote to replace this new implementation like all the implementation to new implementation using on change voting without asking anyone, anybody that can propose a change to the whole consensus with breathability of the consensus and also with a breathability of the client. So technically they can replace everything, they can do it for for good or for bad.
Meher: If I’m a validator, the current design is both of us will make the same money in a year if our infrastructure has the same performance.
Igor: That’s right. What we saw that when token price is going down for some validators its not interesting to be validators anymore. So they step out and the reward per year is increasing. Because we have smaller rounds and they basically create more points. So that’s something that we observed, some validators stepping out because the reward is not interesting for them anymore.
Meher: But if in a system like this if I am a validator I would naturally want the validator set to be small because the bigger the set grows the more diluted I get.
Igor: There are some points. So like minimum number of validators for the governance is 3 validators, so if you have less than 3 validators, then you cannot make governance decisions in at least 2 vs. 1, so 3 to vote for governance decisions. The maximum number of validators is let’s say 3000 right? It’s a limitation of state storage within the current setting that we have. What is the optimal number of validators? Like when I asked this question myself first I looked into other chains. For example, also I looked into academic research. There is a paper by some researchers from Cornell called Decentralisation in Bitcoin and Ethereum, and he claimed in this paper a number of validators, more than 20 in a quorum type of system, I cannot repeat it as it is, but the basic idea is that if you have 20 validators or more then this is enough to to be more decentralized than the current state of Bitcoin and Ethereum so that that was my base point. Okay guys, we need to have like 20 or more validators. So I told them ideal number of validators when I bootstrap the network, I told it would be great if we can have 25 validators, and they never reached 25 and now it’s 18 plus Master of Ceremonies like the validator without voting rights. When xDAI started it was only 1 validator because I didn’t find a group of people who wanted to be because no incentive no token, you know, run a node pay money for it and people were not interested in running this network and it was quite hard to add first validators. Yeah. I think that based on our experience with with with updates the validator set of let’s say 20 to 25 people in basically in different time zones can upgrade can upgrade the protocol within 24 hours, which is not bad, so within 24 hours they can solve coordination problem to install new software and install it on the servers, deploy it and confirm and discuss again and wait. So it’s quite good. With like just imagine we have thousands of validators, this coordination problem would be much harder to solve without automatic updates and you know, all this centralization points.
Friederike: There’s also a token in this network, the POA token. So what does that token do?
Igor: Well the protocol was designed in 2017, right? So we and we looked into how to make Ethereum protocol more scalable so basically copy the idea of of the Ethereum utility of a token. Basically, it’s a way to pay for geth and also unit of account and medium of exchange on the network that that’s that was the basic promise of this token. Later on we exchanged use case. We added the additional use cases. So the interesting use case with with the with the first Bridge which we launched on POA. So this native token we wrapped it in to ERC-20 token on mainnet and this token, it was like the first ERC-20 token connected to coin payments. So it was possible to use it as a medium of exchange between let’s say vendors and clients. Also, it can be landed and borrowed on ETHLend, swapped to other tokens on Uniswap, paraded in a web form or native tokens on exchanges, and possibly will be some staking features if validators of POA decide to migrate to our new dedicated proof of stake consensus.
Friederike: Tell us about this new delegated POS.
Igor: Yeah, this dedicated proof of stake is designed for xDAI first. So one of the main questions to validators people think that this structure is centralized. I don’t call it centralized I call it exclusive, so validators can decide who will be new validators and we can see on the forum that validators don’t like some validators, reasons for example, one obvious reason because a new validator don’t know any other validators, right so people don’t trust him. That’s that’s one of the one of the problems like the exclusion of the protocol is something that can not be good in some situations, for example in potential censorship problems. When validators set is small and exclusive and there are some orders for example to stop and not do whatever you do, this exclusive validator set can break promises of fullness of the network right of the consensus. That’s one of the main reasons to make the public permission network with inclusive access to to see the validators. So that’s that’s that’s why we need staking because anyone with staking token can participate in staking as a candidate who can be elected as a validator and to bring reputational parts to this selection and also to select a subset of validators not only based on their own state, but also by the public trust. We added delegation to this consensus and this is why it’s deleted proof of stake. Some people don’t like validator proof of stake ideas, especially after you know EOS and they think it’s still centralized so we looked into problems with EOS and like what people think that is centralized in EOS and decided to design it differently. For example, delegators in DPOS consensus by POA are incentivized by the protocol. So they receive part of the emission reward, they can get some fees from Bridges and so forth and EOS they don’t get any reward from the protocol and the reward they get is under the table basically, right and also how the reward is distributed between validators and delegators is is a bit different. All validators within the validator set or elected to be validators for staking a poke get equal rewards. No matter how many coins you have you you will get equal reward for the for this slot. Let’s say if we have 19 validators, each validator will get 1/19. Within each of these 1/19, validator has distribution between validator and all the delegators who stake as delegator, and this distribution is actually also fair to delegators when they delegate more than a validator, they decrease rewards of the validator and they compete between each other. We can imagine that delegators have so many coins that rewards of the validator will be 0 because the pressure of points delegated on this validators will for bit too big. So that’s why we added what we call saturation point and validators cannot get below the saturation point. So worst case scenario, each validator can be sure that they will get 30% out of 1/19 of the reward per staking poke. So that’s something that we that we added for a for fairness. And also I’d like to mention that the staking consensus reward distributions, control all this consensus related parts of this protocol, they all implemented in Solidity which is good for for developers because they can say if someone is interested in taking this protocol and adopting it for their own side chains, they can take it and tinker with it. And you know, it’s a high-level language. It runs with an EVM with all the advantages of Solidity, access to developers, access to smart contract auditors for modification, which is very hard to get on like protocol built on a low level.
Meher: What’s really fascinating about about POA is that you’re like, you know challenging conventional wisdom on many dimensions and you have a protocol that does many things that other protocol designers just wouldn’t touch. Now there are reasons why protocol designers wouldn’t touch things like this, right? So for example, this idea that you can have a minimum reward rate for the validator. It cannot go below 30% of 1 by 19. This is an issue that’s being debated in the Cosmos ecosystem, should there be like a UBI for validators. Should there be like a basic income for all of these validators. The problem that prevents something like Cosmos from doing it is that the argument is if you give a UBI to all the validators, well, the validators will just promised the delegator hey delegate with me and I will give you part of my UBI as extra rewards outside the protocol. And so the UBI will not function as a UBI because the validators and the delegators can break the UBI outside the chain. Now it feels like you haven’t worried about a problem like that at all and you will implement a UBI and we’ll get to see the result of that.
Igor: Right and the this reward is from from from only from from stake tokens. There is no reward the that they distribute between them as a like reward per block, right? They only distribute reward that they get from the tokens the stake right? So there is a there is an emission rate and they get reward based on this emission rate from the token they staked and people staked on top of them, right so that there is no reward which is created like out of nothing each block and after based on some distribution, you have to distribute between different parties. Also these DPSO consensus supporting multi-chain staking, so the staking token lives on Ethereum mainnet and can be bridged to xDAI or on another network with the same emission curve and the same supply. So if I stake on xDAI 1 I’ll get my reward on xDAI 1 and I cannot stake on xDAI 2 because bridge knows that I bridged my token to xDAI 1. If I see that there are so many delegators on xDAI 1 or there is only 3 validators are on xDAI 2, I can bridge my tokens to the next network and delegate on validators on the second network. I I took this concept from MMORPG so if you ever played World of Warcraft, there are servers which are overpopulated and you have the same game setting but it’s you know, the more people it means that you have to wait longer and lines and some bosses you have to wait for the response so you can move your character to another server using a bridge right and on this server you can you know play with all your items and get whatever you want from the game, but with with different let’s say economic terms, right? So that’s but it’s kind of the same key. So that’s what we call multi-chain staking, and also solves our problem with what if we want to launch one more network like okay today we enjoy xDAI but the same concept can work with different stable tokens and very interested in Ampleforth which is a very interesting concept and some other stable tokens like can we launch one more network like xDAI, but with different native token and the same staking token, so it’s possible.
Friederike: So we’ve talked about xDAI for a while now, maybe we should give a brief introduction of what that actually is.
Igor: Yeah. Sure. xDAI is what we call the first-ever stable chain. So it’s a it’s a it’s a new side chain based on Ethereum protocol with DAI as a native token. How to make DAI as a native token, we have an interoperability solution docking bridge and this docking bridge can bridge DAI from mainnet to xDAI. So on mainnet this bridge allows to lock unlock DAI, and on the other side this bridge allows to mint and burn. So minting and burning of native tokens is something that is unique for blockchains because usually the emission curve is defined by the protocol and external events cannot just you know send to consensus messages okay, please print this amount of coins for this user, right? That’s something that we don’t have usually in consensus algorithms for native tokens. So with xDAI each block is created with empty rewards but when DAI is locked on Ethereum side the bridge can delay this event and this event is is a command to the consensus to mint new coins for user who locked these coins on the Ethereum side. The market cap of xDAI is like 32,000 DAI, so this amount of DAI is locked on Ethereum mainnet side and minted on xDAI side. So that’s something that gives very interesting perception when you use the network if you have an account balance in DAI it looks like you have an account balance in dollars, and when time passes you have the same account balance as if you don’t spend it as something that is very convenient for us in real life, it’s very hard to get them in cryptocurrencies. That’s why this protocol we started to think how to use it in peer-to-peer payments and there are some very exciting developments around the protocol by the community, the most well known well known is Burner Wallet. The second big use case for xDAI is a platform for smart contracts. It’s interesting to use it for smart contract developers because they can they can understand how much will they pay for for platform usage and also they can give stable bonuses to their users and they can calculate unit economy of their smartphone shaft, which is also important for when you use cases. Like if you if you discuss the economy of a game with a game developer, we have calculation of lifetime value of a user and how much they spent together user how much they spent on is hosting the user and what is the revenue of this game developer and with volatile tokens like one if you don’t mind that it’s hard to predict what the price of Ethereum will be in a in a year or in a day?
Friederike: So the POA and xDAI networks are not trusters, but they offer fast finality and low transaction costs. In some way this limits the use cases for the POA mechanism. So what are the things that you think definitely should absolutely not run on POA?
Igor: For me it’s interesting to see any use case which can be run on the chain is interesting to see and the question that we don’t know the answer for is how the network will operate under conditions of pressure and both on like validators and denial of service attacks, which didn’t happen much on side chains. So for us, it’s quite interesting to see the old type of applications deployed on the network. Although we cannot facilitate some of these activities, right? We are working on bringing private transactions using snacks. We’re not developing snacks ourselves, but we’re hoping other teams to bring mixers to POA and xDAI and to integrate these mixers into some wallets like Burner Wallet have for this privacy fund and we already distributed 40,000 DAI during the last two months has and we plan to distribute 60,000 DAI more and likely this project will bring use cases which can be interesting for the like censorship resistance and so forth. I mean that public networks should not be afraid of specific use cases, if public network can can can operate with any use case then it’s truly public network
Meher: Cool. And what kind of applications are getting the most traction on the POA Network and on xDAI?
Igor: With POA, now we are focusing on use cases with games, blockchain games and at the moment if you open the State of the DApps, which is a ranking site for platforms with a smart contracts the game number one is called Geon, is a geocaching game. It’s based on POA Network. So they decided to use it because it provides temporary scalability solutions and they don’t need to rewrite their application to run it in a side chain. It’s actually quite interesting game because it’s not showing wallets and tokens and balances in tokens to users and they’re getting traction and after they will get enough traction with users they will open this token economy to people. The use case for xDAi is what we plan to focus on and facilitate is peer-to-peer payments. So integration with more wallets. Very exciting development with xDAI is integration with Discord. So exercise integrated with Discord tip button that allows, you know, tipping and the air drops and some form of gambling like Dyson and so forth within the chat, which is quite cool to make in stable coins. And also we plan to support xDAI in as many worlds as possible and facilitate real-world usage of this stable coin. So basically POA for games and xDAI for for payments.
Friederike: What do you hope to achieve in the next year or so with POA and xDAI?
Igor: The main achievement for us will be migration to delegated proof of stake. And the second part of this migration is migration to new BFT consensus protocol which we’re working on for the last year, it’s called Honey Badger BFT. It’s quite exciting because it’s asynchronous consensus and the censorship resistant with onchain randomness and it’s already implemented. We made the security audits for it and now integrating with several partners, with Luxor and Artists we;re integrating it into their Ethereum client and when it’s integrated will send upstream to Parity and let other people to use this exciting consensus algorithm. There are not many censorship resistant consensus out there and Honey Badger was quite hard to to implement. We also had educational articles how the consensus is working and what our extension to this consensus like Dynamic Honey Badger, Honey Badger itself is not designed to support some features which are important in the POA or DPOA settings. For example, it doesn’t support Dynamic validator set when we can add or remove validators from the consensus and that’s something that we had to to implement on top of Honey Badger. So we have educational materials on our forum, this very hard consensus is explained in easy-to-understand language.
Friederike: Thank you for being on the show Igor, that was super interesting. I’m excited to see where this project goes.
Igor: Yeah. Thank you very much for hosting me here.