Bitcoin's Proof-of-Work Can Be Made More Efficient, IBM Research Claims

Proof-of-work, the consensus mechanism that secures bitcoin and numerous other cryptocurrency blockchains, has given the technology a reputation for hogging energy.

Scientists from IBM Research, the tech giant's R&D arm, claim to have found a way to reshape and combine blockchain architectures including PoW, arriving at what they call in a paper a "Sweet spot" for energy efficiency, scalability and security.

"Efficiency in IoT can be defined as an optimal utilization of hardware resources and energy. Therefore, in order to achieve that, the IoT devices on the blockchain should optimally utilize resources and energy to maintain and progress the blockchain."

Working on a testnet, or simulated blockchain environment, the IBM researchers have been dividing the nodes into small groups of 250 to 1,000 and then allowing an algorithm to decide what proportion of each group should be doing the mining work, depending on the amount of power used by each node and the security required.

"At the moment we look at blockchains like totally flat peer-to-peer systems, in which all the nodes have to do the same things, compete against each other to get that mining reward" Dr. Emanuele Ragnoli, technical lead at the IBM Research Smarter Cities Technology Centre in Dublin, told CoinDesk.

In a nod to this patchwork, the IBM Research team has dubbed its lab project "Hybrid IoT Blockchain."

Stepping back, the IBM Research work is part of a broader push to create a future machine-t0-machine economy, in which devices would have their own blockchain wallets and trade with each other.

The IBM Research project is notable because it suggests that the deterministic requirements of blockchains can be combined with the black box of AI, allowing machine learning algorithms to alter the shape of blockchains to adapt to power or latency limitations, without compromising security.

"Why not augment the blockchain with analytics and AI algorithms that can actually shape the blockchain in a way that it helps it to overcome some of the limitations that are out there now?" said Ragnoli.

So how could this work impact the world of cryptocurrencies? Merely saying that PoW just needs to be better organized is like saying the free market could be more efficient.