Terminology

Before discussing the details of Credits Core framework architecture it’s worth defining certain basic terms. Some of the terms are so widely used and abused across the industry it’s worth stating so to avoid misconceptions.

Blockchain

In the limited technical sense implied here the term blockchain refers to the data structure comprising of cryptographically linked data blocks. It implies an ability to reliably verify the contents of the blocks but does not imply a distribution of any kind.

The blockchain structure assumes and enforces append-only ability and intentionally gives no way to edit data cryptographically locked in the blocks.

Blockchain does not guarantee or prevent the replacement of parts or all blockchain with other blocks with different contents in case the consensus mechanics allows that, but that lies with the domain of DLT and consensus (see next).

Distributed Ledger Technology

Distributed Ledger Technology (DLT) is a system that allows reliable replication of data between multiple nodes according to certain consensus algorithm. Usually it assumes the full and equal distribution of data between all nodes and without a central authority, but this really depends on the consensus algorithm used.

DLT depends on blockchain to operate since without ability to securely and independently verify the data the DLT degenerates into a simple master-master replication and can no longer guarantee the integrity of data being replicated.

Consensus

An algorithm defining the way nodes of the DLT agree on the contents of the next block. Certain algorithms of consensus do allow for replacing of parts of blockchain starting from a certain block with different versions of history (forking), while others don’t.

Consensus may require a certain arbitrary cryptographic challenge to be continuously solved (Proof of Work), provide a proof of possession of certain cryptographic keys (Proof of Stake) or have any other mechanics, but generally, it has to be deterministic and independently verifiable, so likely will rely on strong cryptography.

Proof of Work consensus

Proof of work is the most often mentioned mechanism for achieving consensus. Proof of Work requires that a contributor does a deterministically difficult amount of work that is then easy to check. Bitcoin, for example, does this by making miners hash until they get the longest string of zeroes. This artificially slows down block creation and makes it computationally and thus financially expensive in the Bitcoin network. Anyone can mine blocks but given the current normalised difficulty, it takes a ridiculously long time for non-specialized hardware to mine a valid block. This process is the only way invented by now to reliably implement a public permissionless consensus where anybody can participate.

Proof of Stake consensus

Proof of stake is far more like a traditional weighted voting model. Everyone locks up some value as a promise of their good intentions inside the system and then there are fixed voting rounds where each person votes using the weight of the value locked up. In an example both Alice and Bob stake 50 value into the system, they both have equal votes but neither have the majority. Both together can vote and provide the majority for confirming a block. Anyone can propose a block but only those with stake can vote.

This model does work very well in case the permissioned DLT, i.e. where participants of consensus have to be given an explicit prior permission to join. In this case, their stake contribution can be verified as part of the permission granting process.

Blockchain forking

Applied to the blockchain, the event of forking is an occasion where starting from a certain block the chain of blocks splits into two or more chains, descending from the same parent but further producing different blocks according to different rules.

Some DLT consensus algorithms allow that, others don’t.