A Wild Velvet Fork Appears! Inclusive Blockchain Protocol Changes in Practice
The loosely defined terms hard fork and soft fork have established themselves as descriptors of different classes of upgrade mechanisms for the underlying consensus rules of (proof-of-work) blockchains. Recently, a novel approach termed velvet fork, which
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Abstract. The loosely defined terms hard fork and soft fork have established themselves as descriptors of different classes of upgrade mechanisms for the underlying consensus rules of (proof-of-work) blockchains. Recently, a novel approach termed velvet fork, which expands upon the concept of a soft fork, was outlined in [22]. Specifically, velvet forks intend to avoid the possibility of disagreement by a change of rules through rendering modifications to the protocol backward compatible and inclusive to legacy blocks. We present an overview and definitions of these different upgrade mechanisms and outline their relationships. Hereby, we expose examples where velvet forks or similar constructions are already actively employed in Bitcoin and other cryptocurrencies. Furthermore, we expand upon the concept of velvet forks by proposing possible applications and discuss potentially arising security implications.
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Introduction
Nakamoto consensus, the underlying agreement protocol of permissionless blockchains, enables eventual consensus on the state updates to a distributed ledger if certain majority assumptions on the hashrate of honest mining participants are upheld [16,27]. A substantial amount of research has focused on correctly assessing the provided security guarantees, such as the ability for an adversary to succeed in double spending transactions [5,21,31]. Despite these remarkable efforts, there still remain open questions and gaps in our understanding of this agreement mechanism. One such topic is approaches for securely changing consensus rules of permissionless blockchain protocols [35], such as Bitcoin and Ethereum, which is currently topic of ongoing debate. Reaching agreement on a common set of protocol rules in a decentralized manner could prove to be a problem as difficult as the double-spending problem Bitcoin originally set out to solve. A. Zamyatin and N. Stifter—Contributed equally to this work. c International Financial Cryptography Association 2019 A. Zohar et al. (Eds.): FC 2018 Workshops, LNCS 10958, pp. 31–42, 2019. https://doi.org/10.1007/978-3-662-58820-8_3
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In this paper we first provide a brief background on core concepts related to this topic after which we discuss and define current protocol upgrade mechanisms considered in permissionless blockchain systems, such as hard forks and soft forks. In particular, we focus on the recently proposed concept of velvet forks by Kiayias et al. [22], which seeks to render protocol upgrades via soft forks more inclusive. We then provide real-world examples where velvet forks or similar concepts are, or have already been, employed. Furthermore, possible negative impacts of such an approach are outlined. In particular with regards to the underlying (game-theoretic) incentive model, such changes may lead to negative side effects in permissionless blockchains. Finally, we suggest the applicability of velvet forks to a number of existing protocol improvement proposals and outline interesting directions for future work.
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Background
The
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