A New Proof of Work Asset Class
Reference to crypto assets in this article are for informational purposes only and should not be taken as financial advice.
We propose an alternative style of PoW protocol, Zero-Knowledge Proof of Work (zkPoW), which corresponds to a new asset class of zkPoW base layer coins and zkPoW ecosystem assets. A zkPoW protocol creates incentives that channel energy consumption toward verifiable general-purpose computation. We introduce Nockchain, the first zkPoW protocol, alongside $NOCK, its base layer coin. Uniquely in Nockchain, zkPoW incentivizes useful computation that secures the protocol and eventually powers its transaction-processing.
Scarce, non-sovereign-issued, decentralized digital assets were once a fringe idea, but today, the largest financial institutions in the world describe them as a flight to safety. Broadly speaking, there are two categories of digital assets: base layer protocol coins and ecosystem assets built with base layer affordances. Among base layer protocol coins, there are two primary approaches to achieving trustless consensus, which correspond to two emergent ecosystems: Proof of Work (PoW) and Proof of Stake (PoS).
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│ PoW-ecosystem │ PoS-ecosystem │
│ Asset │ Asset │
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│ PoW Coin │ PoS Coin │
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Among base layer tokens, PoW has 70%, or $1.56T, and PoS has 30%, or $595B, of value by market cap. In PoW, virtually all value has accrued to Bitcoin, a base layer coin, whereas in PoS, a more heterogeneous set of financial experiments is occurring, accounting for an additional ~$500B in value in PoS-ecosystem assets. PoW and PoS base layer coins have fundamentally different economics, and their respective base layer economics impact all ecosystem assets.
PoW protocols use tokens to incentivize energy consumption in the form of computation. This energy consumption is directed toward securing the protocol. PoW protocols receive continuous market feedback from the physical world in regards to the value of their token incentives through the puzzle difficulty and workrate. The security of PoW protocols are measurable through their puzzle difficulty, which provides a way to objectively compare the real value of PoW protocols to one another regardless of the nominal value of their base layer coins.
Today, there is only one kind of PoW protocol: hashing-PoW. Hashing-PoW systems use a hash algorithm, which produces a collision-resistant digital data fingerprint, as their PoW puzzle. Hashing-PoW systems perform mostly useless computation, but consume massive amounts of energy and have incentivized the creation of an entire hardware industry competing to provide this useless computation at scale.
PoS protocols use tokens to incentivize validation of a stake-weighted randomized leader election. PoS protocols are built to minimize energy consumption, and as such, incentivize each validator to provide the minimal computational power necessary to reliably stay in consensus. PoS protocols minimize the connection between their systems and the physical world. The security of PoS protocols are only measurable through the nominal value of their base layer token, which does not provide an objective way to compare PoS protocols to one another. As such, when new PoS protocols launch, they often dilute existing PoS protocols.
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│ zkPoW ecosystem │ Hashing-PoW │ PoS ecosystem │
│ Asset │ ecosystem Asset │ Asset │
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├──────────────────┼──────────────────┼──────────────────┤
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│ zkPoW Coin │ Hashing-PoW Coin │ PoS Coin │
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In a zkPoW consensus mechanism, a Succinct Noninteractive Argument Requiring Knowledge (SNARK) is used as a PoW puzzle. If the SNARK is a program that verifies transactions that modify the underlying blockchain state, the PoW mechanism is said to incentivize necessary work (KB19). This necessary work creates a link between the verifiable compute that powers the chain and the blockchain state (KT20). Nockchain is the first protocol that implements necessary zkPoW to power its blockchain and secure its scarce namespace.
Nockchain is a permissionless settlement layer that stores succinct proofs of truth claims in a scarce namespace with an immutable history. Nockchain’s native asset, $NOCK, is a convertible economic instrument that values this scarce namespace alongside the verifiable computation necessary to write to it. Users may pay the protocol $NOCK to have a computation SNARKed and posted into the scarce namespace. As such, the Nockchain protocol provides permissionless access to Global-Consensus SNARKs as a Service.
$NOCK has a hard-capped total supply of 2³². The $NOCK commodity is being fair-launched with no premine, and is entirely distributed to miners. $NOCK issuance first acts as a bootstrapping mechanism for subsidizing and standardizing verifiable compute capacity targeting the Nock zkVM.
Nockchain is an experiment to instantiate the first zkPoW protocol. In the first version of Nockchain, we intend to enable rapid advancements in the efficiency of a commonly used SNARK framework. The PoW puzzle will directly incentivize the creation of specialized proving hardware targeting the Nock zkVM. We then intend to use zkPoW to bootstrap verifiable compute markets that provide decentralized, high-throughput settlement of arbitrary computational statements. If the incentives work as intended, the energy consumption of zkPoW protocols may grow to rival that of hashing-PoW protocols over time. In such a scenario, access to verifiable computing would be ubiquitous.