I went to a workshop run by Ethereum today, to learn about cryptocurrency/virtual currency from a developer’s point of view. Ethereum can be thought of as Bitcoin+contracts; they are also doing various things to address some of the design problems experienced by Bitcoin. This article is about the contract component of Ethereum, which is being promoted as its unique selling point.
The Ethereum people talk so much about contacts that I thought once currency (known as ether, a finney is a thousandth of an ether, with other names going down to ) had been mined it was not considered legal tender until it was associated with the execution of a contract. In fact people will be free to mine as many ethers as they like without having any involvement with the contract side of things.
Ethereum expect the computational cost of mining to be significantly greater than the cost of executing contracts.
A contract is a self-contained piece of code created by a client and executed by a miner (the client pays the miner for this service). The result of executing the contract is added to the data associated with a block of mined currency (only one contract per block).
How confident can the client, and interested third parties, be that the miner paid to execute the contract is telling the truth and didn’t make up the data included in the mined currency block?
The solution adopted by Ethereum is to require all miners involved in the execution of contracts to execute all contracts that have been associated with mined currency, so that the result posted by the miner who got paid to execute each contract can be validated (51% agreement is required).
For this design to work, the cost of executing contracts to verify the data produced by other miners has to be small relative to paid income received from executing contracts.
If somebody is in the ether mining business, executing contracts has the potential to provide additional income for a small increase in effort, i.e., the currency has been mined why not get paid to execute contracts, adding the resulting data to blocks that have been mined?
Ethereum has specified the relative cost of operations executed by the Ethereum Virtual Machine. The Client specifies a value used to multiply these costs to produce an actual cost per operation that are willing to pay.
Requiring the community of contract executors to execute all contracts creates a possible vulnerability that can be exploited.
To profit from executing contracts the following condition must hold:
where: is the ratio of unpaid to paid contracts, is the average number of operations performed per contract, is the average execution cost per operation and is the average amount clients pay per operation.
This simplifies to:
What would be a reasonable estimate for , the ratio of unpaid to paid contracts? Would 1,000 miners offering contract execution services be a reasonable number? If we assume that contracts are evenly distributed among everybody involved in contract execution, then there are disincentives of scale; every new market entrant reduces income and increases costs for existing members.
What if businessman Bob wants to corner the contract market and decides to drive up the cost of executing contracts for all miners except himself? To do this he enlists the help of accomplice Alice as a client offering contracts at extremely poorly paid rates, which Bob is happy to accept and be paid for appearing to execute them (Alice has told him the result of executing the contracts); these contracts are expensive to execute, but Bob and Alice know number theory and don’t need a computer to figure out the results.
So Bob, Alice and all their university chums flood the Ethereum currency world with expensive to compute contracts. What conditions need to hold for them to continue profiting from executing contracts?
Lets assume that expensive contracts dominate, then the profitability condition becomes:
where: is the increase in the number of contracts, the increase in the average number of operations performed per contract and the increase in average execution cost per operation.
This simplifies to:
What values do we assign to the three multipliers: ? Lets say , which tells us that the price paid has to increase by a factor of 150 for those involved in the market to maintain the same profit level.
Given that Ethereum are making such a big fuss about contracts I had expected the language being used to express contracts to be tailored to that task. No such luck. Serpent is superficially Python-like, with the latest release moving in a Perl-ish direction, not in themselves a problem. The problem is that the languages is not business oriented, let alone contract oriented, and is really just a collection of features bolted together (the self absorbed use case for the new float type: “… elliptic curve signature pubkey recovery code…”, says it all). Another Ethereum language Mutan is claimed to be C-like; well, it does use curly brackets rather than indentation to denote scope.
If Ethereum does fly, then there is an opportunity for somebody to add-on a domain specific language for contracts, one that has the kind of built in checks that anybody involved with contracting will want to use t prevent expensive mistakes being made.