How can IOTA's proof of work provide sufficient network security?

Question

This is a controversial post I found in the IOTA slack. The concerns are regarding IOTA's security. How does IOTA approach the specific statements?

IOTA is fundamentally broken.

It's a PoW crypto that uses a dag (ok). Hype aside it's a minor change that's equivalent to transaction chains in Lightning Network or Raiden, offering exactly the same advantages (asynchronous) and disadvantages (lower security). Where iota breaks down is assuming a model with everyone mining their own transactions can work.

What PoW means in practice is that cost spent on mining = security. Ie. $100 fees per hour? Spend >$100 (in energy used for mining) to rewind these transactions. It's better with asics as that adds 'has access to asics'.

The reason PoW currencies currently work is because cost is shared among every owner due to inflation - with it, total cost per tx in bitcoin is $81.91. Iota is economically exactly like Bitcoin without any block reward, which requires every transaction to pay a very high fee (in energy used for mining) for any reasonable security.

Firstly, it requires every iota sender to be able to do that - which means high-speed hardware capable of mining and access to required energy. A premise fundamentally incompatible with light IoT devices.

Secondly, the fee market doesn't work due to the free rider problem. Everyone is going to use low fees (=low PoW expenditure) hoping that a high-fee transaction confirms it, or lots of other low-fee transactions. Which means no high-fee transactions, which means no security at all.

That's why there's a coordinator. It's never going away. The fundamental design is hopelessly broken.

How can I argue against that?

Source

Answer 1

What PoW means in practice is that cost spent on mining = security. Ie. $100 fees per hour? Spend >$100 (in energy used for mining) to rewind these transactions. It's better with asics as that adds 'has access to asics'.

To buy Security with huge costs of transactions is not reasonable anymore. Fiat Cash or anything else is cheaper. This would be dump decentralization, but we want smart decentralization. Security in Iota is achieved diffrently.

In Iota it is not about money spend on each Transaction which adds the security. It is about Confirming others. The number of Transactions which an attacker has to confirm increases exponentially, because he confirms other transactions too. So he is not only attacking but also strengthening the network. This is the essential aspect. PoW is only used as protection against spam. So the number of Transactions one can make is limited.

The reason PoW currencies currently work is because cost is shared among every owner due to inflation - with it, total cost per tx in bitcoin is $81.91. Iota is economically exactly like Bitcoin without any block reward, which requires every transaction to pay a very high fee (in energy used for mining) for any reasonable security.

There will be a time, when there are no Blockrewards for Bitcoin anymore. So Bitcoin won't work anymore, when it comes to that?

PoW is not the essential aspect of security, like already explained above.

Firstly, it requires every iota sender to be able to do that - which means high-speed hardware capable of mining and access to required energy. A premise fundamentally incompatible with light IoT devices.

The more IoT devices are part of the network, the higher is the work an attacker has to do, to compromise the network. So the more IoT devices are contributing, the easier the PoW will get. A second argument against your point, is the future ability to outsource PoW to your full node. Which will enable even lightest IoT devices to be part of the network.

Secondly, the fee market doesn't work due to the free rider problem. Everyone is going to use low fees (=low PoW expenditure) hoping that a high-fee transaction confirms it, or lots of other low-fee transactions. Which means no high-fee transactions, which means no security at all.

A huge number of low fee transactions, will be secure, because the number of transactions is maintaining the security, the weight is just second.

That's why there's a coordinator. It's never going away. The fundamental design is hopelessly broken.

Further simulations and future will show you the opposite.

Source for my Words: Iota Whitepaper

Answer 2

"Hype aside it's a minor change that's equivalent to transaction chains in Lightning Network or Raiden, offering exactly the same advantages (asynchronous) and disadvantages (lower security)." - this is a https://en.wikipedia.org/wiki/Straw_man argument. All the rest is based on this fallacious foundation, no surprise the resume is fallacious too.

Answer 3

I don't understand enough of how IOTA works yet, so I can only suggest you try to understand this blog post about IOTA's security against attacks with great hash-power.

It basically says that having the hash-power is not enough for an attacker but he also needs to be directly connected to a very large fraction of the network. I can't tell you if this a reasonable explanation because I don't understand all parts of it.

I suggest you try to understand what the post you found says, break it apart into individual statements and ask more specific questions about them.