LaQ Pay
LaQ Pay
LaQ Pay
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LaQ Pay

Whitepaper

LaQ Pay

The third generation of cryptocurrency

LaQ Pay cryptocurrency platform



LaQ Pay – A revolutionary cryptocurrency platform created as a long-term infrastructure blockchain project of the third generation. The Core LaQ Pay developers have laid into its foundations on security, reliability, ease of use and highest speed of transactions All without any commission built into the infrastructure. The coin is intended to solve the basic problems that impede implementing the original vision of Satoshi Nakamoto.

The LaQ Pay consulting algorithm achieves complete decentralization and consensus in the scope of the blockchain. This is one of the basic difference from the Bitcoin network which at this time is controlled by the three mining pools. They have considerable control over the future Bitcoin and this is why it can't be called a completely decentralized system.

During the development of the LaQ Pay functionality, all the most significant technical achievements in the cryptocurrency platforms building as well as all known drawbacks were taken into account. As the result, a truly reliable decentralized fiat money alternative was created having zero commission and the highest safety level.

LaQ Pay

Features

LaQ Pay

 

Fast transaction confirmation – the waiting time of around a few seconds. Transactions are grouped in blocks of fixed size.

 

Absence of mining rules out the third parties influence over the blockchain which prevents possibility of carrying out various types of attack.

 

The users of LaQ Pay are credited with an internal asset LAQH (LaQ Hours) providing commissions without detriment to the main LAQ asset. The amount credited depends on the LAQ asset user possession period.

Obelisk

Obelisk – consensus algorithm of the LaQ Pay project



The blockchain LaQ Pay uses a new consensus algorithm type called Obelisk, which replaces Proof-of-Work (PoW) and Proof-of-Stake (PoS).

The goal of the LaQ Pay project is to rectify the main security deficiencies and «centralizing tendencies» pertinent to blockchains whose consensus is based on the PoW and PoS algorithms and the coin creation is mining-based. Therefore the LaQ Pay developers have created a cryptocurrency better agreeing with Satoshi's original vision of the completely decentralized digital currency system.

At that the LaQ Pay technology creates a blockchain without the necessity of mining, having the fixed crypto-tokens volume, 10-second transactions and excellent security system. If the connection between the token creation and network control becomes distorted, the tokens lose their political function and become rather a type of the digital property in the direct sense of the word.

Proof-of-Work and Bitcoin system



The fundamental miscalculation at the Bitcoin early programming stage was that mining is the economic stimulation structure base which has to facilitate the decentralizing. In reality the connection between the consensus and the hashing computing power lead to the acquisition of ever increasing capacity and creates the risk of establishing private control over the network consensus.

For example, the Bitcoin network in actuality is controlled by three commercial mining pools which succeeded in concentrating a sizable part of hashing capacity at their servers. These pools have started acting as a cartel dividing the hashing capacity between themselves by agreement. The connection between the mining and network control was mentioned by Satoshi as the main no cryptographical menace to network stability. It allows the players who have concentrated in their hands sufficient computing capacity and achieve domination in hashrate, in the event of a 51% attack whether to falsify or rollback transactions in the network. It is said that this vulnerability has become less relevant in a situation when hashing capacity is concentrated in the hands of those invested big money in Bitcoin network and their survival depends on the high Bitcoin valuation. Nevertheless this does not change the fact that the ability to influence the network remains in somebody's hands and the cryptocurrency essence itself which is based on the decentralized distributed ledger is distorted.

Thus, the Bitcoin network PoW algorithm has security and monopoly problems in the form of establishing control over the network by those capable to mobilize sufficient economical resources to control the mining process.

This means that the network is inefficient both economically and ecologically. Goes on the ever-increasing commissioning of mining capacity, large amount of electricity is consumed – to the amount of tens of millions. These expenses can only be offset by exponential growth of new users investing additional capital.

Only the few of established coins like Bitcoin and Ethereum can attract adequate number of users to achieve this continuing inflow. While the majority of PoW and PoS- based coins is doomed as the insufficient capital inflow will lead to lower mining payment rate and the cost of the coin will approach the mining cost until the coin is abandoned.

At the moment the Bitcoin economy in based on the new users investing their money which is then thrown into the mining pit and burned in a sacrificing ritual at the altar of electricity cost. If the average user will have to pay the miners fees covering their electricity cost directly as transaction fees instead of be robbed by them through the inflation by means of creating new Bitcoins, then the price of each new Bitcoin transaction will be more that 50 US dollars.

Proof-of-Stake centralizing tendency



While the Proof-of-Stake algorithms do away with the problem of coping with the 51% attack, they are potentially even more prone to centralizing than PoW networks. In PoS the network participants cryptocurrency deposits size defines their powers and number of votes when deciding network technical changes. The network participants can receive the profits proportionate to their share independently of the computing capacity.

This principle significantly increases the economical barriers for the 51% attack as the costs of acquiring in the network of the majority of the tokens on the open market by all probability will exceed the potential gain. If the culprit will be one of the main network participant, he will suffer more than others by the attack on the network stability or the cryptocurrency external price.

Nevertheless, despite the raising barriers against person-initiated attacks, PoS creates a centralizing impulse as powerful, if not more so, than in the case of PoW. Joseph Young concludes in his comparison of the two systems at coinfox.info: «A system where the major stakeholder enjoys extensive control and authority over both technical and economic aspects of the network creates a major monopoly problem». While in the PoW system the voting over the introducing network technical changes «is divided among miners, developers and other crucial members of the community», in the PoS system «major stakeholders have a technical ability to make any changes they like without considering the will of the community, businesses, miners and developers. This centralisation of voting power and, essentially, control of the network defeats the purpose of a distributed ledger-based cryptocurrency since it contradicts its entire principle of distributing all elements within the network to avoid the presence of a central authority».

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Obelisk – distributed consensus algorithm

In order to solve the centralization problem LaQ Pay goes beyond the PoW and PoS. It uses a distributed consensus algorithm called Obelisk which determines the node's influence on the network according to «Web-of-Trust» approach. In essence, each node has the list of other trusted nodes to which it subscribes, and the density of the node's subscribers determines its influence over the network. Each node maintains its personal blockchain which acts as an «available-to-all channel» where all node actions are seen and publicly registered. As all consensus decisions and communication go through the each node's personal blockchain, the community can easily check the nodes for fraud or collusion. The decision-making mechanism in the network and the degree of the nodes influence on these decisions are open to everyone and transparent.



The public record of each node's actions in its private blockchain allows the network to react to misbehavior by breaking connections with less secure and malicious nodes, shrinking the network to a lesser or more compact core of trusted nodes. Therefore, if the community have no trust in some nodes or feels that the internal network capacity is over concentrated (or under concentrated), it can collectively change the network balance of power by collectively changing the relations of trust with the nodes. The nodes accountability before the community and external auditing as well as the consensus transparency strengthen the collective decision making and thereby introduce into the network very democratic and decentralized elements.

Each node of the Obelisk system (LaQ Pay consensus node) has the public key (identifier) and its own blockchain (public broadcast channel). The consensus decisions and communication are carried out inside the private blockchains of each node – available-to-all records of all node actions. This allows the community to do auditing of any node and any set of nodes and spot the presence of their collusion or other attempts to cheat the system. This openness provides the participants an instrument for identifying the nodes participating in the attacks on the system and makes available all data on the decisions taken inside the network as well as their author.

Each node has the list of the nodes to which it is subscribed. The nodes that have many subscribers are considered having big trust rating and exercise big influence over the network. If the community have no trust in the nodes that represent them or feels that somewhere in the network develops an overconcentration of influence (or, on the contrary, it is insufficient), it can collectively change the network balance of power changing its links of trust with other nodes.

The subscription links can be chosen randomly and/or created through trusted network (subscription is possible only to the nodes of the persons you trust).

When a node receives a new block from the blockchain of the node to which it is subscribed, it publishes the hash of the published block. This is the moment of confirming publicly the reception of the block. Each block has the time stamp and contains cross-references with the blocks in other blockchains. A compact interrelated block acknowledgement chain is created. The created blockchains set up relations of interconnection and can be used as a distributed timestamp system (this is addressed in the following chapter). As a result the network helps to prove that certain data did not exist, was not published or to determine that certain nodes was inactive or disconnected in the defined time interval.

The current version of Obelisk consensus is based on the randomized consensus algorithm authored by Michael Ben-Or.

A Sybil attack inside a random graph (worst case) allows the nodes participating in the attack to control the consensus but these nodes are not able to cancel transactions, which makes null the main economic motive of the attack. In the case of real networks the resistance to such attack is very important and the setting up the compromised node is rather costly from the standpoint of its throughput. This makes big botnets in real networks practically impossible.

The trust relationships are not sufficient and so can be repealed. In case of an attack the network reacts by disconnecting from less trusted nodes and shrinks to a small core of trusted nodes. The public blockchains of all nodes allow to easily identify which nodes are participating in the attack. After the attacking nodes are identified, the loyal nodes break off the connections with them thereby lessening their influence. Thus the main advantages of LaQ Pay network are as follows:

  • LaQ Pay consensus is democratic and its nodes are supported by the community;
  • LaQ Pay nodes consensus if fully public;
  • Each node is accountable to the community and is available for auditing by a third party;
  • The institution of influence inside LaQ Pay consensus is democratic and transparent (but allows disparity).
LaQ Pay

Binary consensus algorithm – choice between two blocks

Each event of making a choice consists in a pair of hashes (A,B). A – is the block parent's hash, B – is the block's own hash. Each node votes for the block that in its opinion has to become the consensus block. If 40% of the blocks to which it is subscribed choose the same consensus candidate, the node transfers its consensus to this block. The node browses the consensus candidates in a random fashion until the block consensus is reached.




Consensus on a set of rival filial options

The more complex system publishes the triplets (A, B, P), where P – is a number in the range from 0 to 1. The sum of all block heirs' P's should be 1. This way of describing the rival consensus allows to take decisions at many blockchain sub-trees.

If the majority of the network nodes are honest, they will converge to the same consensus. LaQ Pay also has a limited version Proof-of-Stake: we bias the voting to the advantage of the bigger transactional cost nodes.

If there exist only two possible consensual choices for a given parent and each of them carries out your transaction, the transaction is finalized successfully no matter which block is chosen by the network. The probability of the previous consensual decisions transaction rollback lowers exponentially relative to the node depth.




Scalability and low energy consumption

The unique LaQ Pay project consensus algorithm, as well as for the creation of blocks, allows to work on an inexpensive equipment with open source code. The algorithm is a scalable and computationally-wise inexpensive alternative to the Proof-of-Work (PoW).




High scalability and low energy consumption

Constructionally the algorithm is a scalable and not requiring big computational capacity alternative to proof-of-work algorithm, therefore both the consensus algorithm execution and blocks creation actions can be done on inexpensive equipment having reasonable price and low energy consumption which makes the cryptocurrency network more safe against possible centalization attempts (meaning that the nodes will be accessible to a wide public).




Resistance to coordinated attacks

Our consensus algorithm is rapidly converging, requires minimal network traffic and can resist to a large-scale coordinated attack of a well-organized malicious nodes network. The algorithm is non-iterative, fast, can be started in a sparse network with the connection to the nearest neighbour (for example in a mesh network) and works well if there are cyclical graphs connected (meaning that the DAG-type connection is unnecessary).

Resistance to 51% attack



Under certain conditions the algorithm basic version can be vulnerable to this attack. In particular, when modified or malicious nodes are in the majority and forward a protocol-compatible and UTXO-compatible block-candidate, this block will win the consensus. But the block having any type of inconsistency is discarded by the (unmodified) algorithm before this block gets a chance to participate in a consensus competition.

The consensus nodes can optionally use the «Web-of-Trust» concept, at that the consensus-related messages coming from unknown nodes (i.e. signed by unreliable public keys) are ignored.

When the «Web-of-Trust» mode is activated, the starting of a very large number of the malicious consensus nodes with the purpose of (a) provoking a blockchain fork or (b) breaking down consensus process will have an insignificant effect unless the overwhelming majority of the «Web-of-Trust» participants unwittingly include these malicious nodes in their trusted nodes lists.

LaQ Pay

Clock synchronization independence

The algorithm does not use the «wall clock» (i.e. calendar date/time). Instead, for the node internal time calculation the block numbers are used which are taken from the verified messages connected with the consensus and the blockchain. It can be unofficially called the «block's clock».




Hidden IP addresses

The nodes are addressed through their cryptographical public key. The node IP-address is known only to the nodes to which it connects directly.




Two types of blocks – the consensus and the blocks-creating

The consensus node receives data from one or several blocks-creating nodes. The algorithms for the consensus and the creation of blocks are different, but both operate on the same data structures. We mention separately the creation of blocks because this will help to understand the consensus algorithm and its integration with the other parts of the system.

Both node types always do authorization and date forge checking. Malicious or invalid messages are identified, discarded and not forwarded further; the nodes of the same rank participating in suspicious actions are disconnected and their public keys are banned.

How does LaQ Pay consensus algorithm works?



For the simplicity let us assume that each node at the same time participate in the creation of blocks and in the consensus, and messages generated by unreliable nodes are accepted, that is no «Web-of-Trust» filtration is done.

The full version (i.e. without these simplifying assumptions) will be available at the LaQ Pay project GitHub repository.

The consensus nodes can optionally use the «Web-of-Trust» concept, at that the consensus-related messages coming from unknown nodes (i.e. signed by unreliable public keys) are ignored.

When the «Web-of-Trust» mode is activated, the starting of a very large number of the malicious consensus nodes with the purpose of (a) provoking a blockchain fork or (b) breaking down consensus process will have an insignificant effect unless the overwhelming majority of the «Web-of-Trust» participants unwittingly include these malicious nodes in their trusted nodes lists.

LaQ Pay

LaQ Pay consensus algorithm description



1. Creation of blocks. Each block-node collects new transactions, verifies them against UTXO «list» (UTXO - Unspent Transaction Output), packs the compatible transactions into a new block and transmits the block into the network.

2. Collection of blocks. Each consensus node collects blocks generated by the block-creating nodes and puts them (having specified the block consecutive number) in a container (separately from the blockchain).

3. Picking the winning block. Each consensus node having collected sufficiently large number of the candidate blocks, or at the fulfilling other criteria, finds the block created by the greatest number of the nodes-creators. The connections are defined deterministically.

4. Verification stage. Each node keeps the local winners statistic notified of by other nodes. When the local winners have been notified by all or the majority of nodes, the node determines the global winner for the current item. If the global winner is also the local winner, the node continues to work as described. Otherwise the nodes take decision based on the external data and local registers: whether (a) to repeat the synchronization with the network or (b) to withdraw from the participation in the consensus and/or creation of the block or (c) to keep the blockchain and request an emergency stoppage.