Byzantine Generals Problem Explained

• Several blockchain-related topics are key to understanding the technology and its applications

Byzantine Generals Problem

• According to crypto experts Ryan and Diorio, it is a top 10 computer science problems (game theory problem)
• It helps explain why blockchains are relevant
• Poses the question, "How can any network reach consensus without trusting a third party?"
• It is a situation where involved parties must agree on a single strategy to avoid complete failure
• Some involved parties are corrupt and disseminate false or unreliable information
• In the scenario, two generals decide to sack an enemy city
• The city is strong enough to defend itself against one of the armies but not strong enough to defend against two simultaneously
• They lose if they don't attack at the same time
• Communicating by sending a messenger back and forth through the enemy city
• To communicate one general will send the message stating the intended attack day and asking for confirmation to attack together
• The messenger runs through the city to deliver the message
• The other general responds with an updated attack day that suits them
• The messenger runs through the city to deliver the message back
• The messenger could get trapped in the city or an enemy could replace the messenger
• All participants need to approve while neutralizing corrupt or misleading players
• Consensus is needed
• Consensus is achieved once the majority of network verifies the validity and accuracy of each transaction
• Bitcoin is the first technology to solve the Byzantine Generals Problem
• Bitcoin's "Proof-of-Work" mechanism established clear, objective rules for any transaction added to the blockchain
• Any traitorous or malicious actor can be discovered by the Proof-of-Work (POW) mechanism
• If these honest, hard-working nodes control the majority of the CPU power of the network, it is virtually impossible for an attacker to corrupt

The Network Effect

• Network effect significance helps in determining the value of a crypto asset
• Indicates the acceptability of an asset
• According to Metcalf's Law, the value of a network is proportional to the square of the number of connected users of the system
• Like mobile phones
• Value is established by engagement to create value
• The more people use bitcoin, the higher the value will be because of the network effect
• This focus on bitcoin as a technology or social network conveys a strong opportunity for nonlinear growth

Zero-Knowledge Proofs (ZKP)

• Increasing demand for privacy and security in digital transactions driving popularity
• There is a growing need to verify transactions without revealing sensitive information, met by ZKPs
• A method where one party (the prover) can prove to another party (the verifier) that they know a certain piece of information without conveying any information apart from knowing it
• In simple terms, zero-knowledge proofs allow proving something is true without revealing how or why it is
• Key properties include
• The prover does not reveal the secret information or 'knowledge' to the verifier
• The verifier cannot learn anything beyond the validity of the statement being proven
• No third party can learn anything from observing the proof
• Works similarly to proving you have an apple without revealing it
• Alice is the prover who has secret information (the apple)
• Bob is the verifier who wants to validate Alice's claim without learning the secret
• By revealing just a "bite" of the apple, Alice proves she has the entire apple without exposing it -Zero-knowledge proofs allow someone to prove the validity of information without revealing the information itself
• The proof conveys no knowledge beyond the validity of the statement
• It's like showing you have an apple without ever taking it out of the basket

ZKP importance and applications

• Enable provably secure communication and transactions, nothing is revealed beyond validity
• Validate identity and prove statement integrity without revealing private keys
• Strengthen blockchain privacy and security without exposing information during transactions
• Applications for ZKPs include
• Financial Services
• Mortgage applications can verify income without exact amount
• Regulatory compliance like KYC & AML without revealing sensitive customer data
• Identity Verification
• Age verification without revealing exact birthdate
• Credential verification – professional or educational with underlying personal data
• Voting systems
• Anonymous voting
• Vote verification
• Supply Chain Management
• Origin verification
• Compliance verification with exposing proprietary information
• Authentication systems
• Password authentication
• Multi-Factor authentication

Blockchain Oracles

• Blockchain oracles are entities that connect blockchains to external systems
• Oracles enable smart contracts to execute based upon inputs and outputs from the real world
• Alice and Bob want to bet on the outcome of a sporting event
• Alice bets $20 on team A and Bob bets $20 on team B
• The $40 total is held in escrow by a smart contract
• When the game ends, the smart contract relies on an oracle mechanism to capture accurate game results off-chain and delivers them to the blockchain in a secure and reliable manner
• The funds can then be released to the correct person

The Byzantine Generals Problem is a game theory problem which explains why blockchains are relevant. It explores how a network can reach consensus without a trusted third party, even with corrupt parties spreading false information. The problem is illustrated with two generals needing to coordinate an attack on a city, where failure to attack simultaneously leads to defeat.