Ethereum: Is it actually possible to create a “verifiably unspendable” address?

Verifiably Unspendable Address: Can Ethereum Achieve This Goal?

In recent years, the concept of verifiably unspendable addresses (VUAs) has gained significant attention among cryptocurrency enthusiasts and researchers. The notion refers to a type of digital address that cannot be spent or modified without revealing its previous owner, making it theoretically secure against double-spend attacks. While some experts believe that Ethereum has the potential to implement VUAs using its proof-of-burn (PoB) mechanism, others argue that this goal may be impossible due to technical limitations and scalability issues.

What is a verifiably unspendable address?

A verifiably unspendable address is an Ethereum address that can be used to spend funds without revealing the identity of the previous owner. To achieve VUA, an address must meet two conditions:

• Proof of Burn: The address has been written (i.e., its balance has been reduced) using a specific transaction.

• Unspendable: When the original owner spends their funds at this address, they cannot be altered or spent without being revealed.

Ethereum Burn Verification Mechanism

Ethereum’s PoB is designed to ensure the integrity and immutability of its blockchain. The burn verification mechanism involves burning a user’s balance using a transaction that includes an Ethereum Gas Gwei (gwei) payment. This payment ensures that the burn transaction is not negligible, and when the original owner spends their funds at this address, the gas usage in the transaction will be verified.

Can Ethereum Implement Verifiably Unspendable Addresses?

In theory, Ethereum could implement VUAs using its PoB mechanism by:

• Introducing new transaction types: Developers could create specific transaction types that meet both the conditions: Proof of Burn and Unspend.

• Using a more sophisticated Proof of Work (PoW) algorithm: Researchers have proposed alternative PoW algorithms, such as Byzantine Fault Tolerance (BFT), that could achieve higher security standards while maintaining Ethereum’s scalability.

However, there are several challenges that need to be addressed:

• Scalability: VUAs may not scale well due to their reliance on complex transactions and proof-of-work mechanisms.

• Security

  : The scalability limitations of the PoW algorithm could compromise overall security.

• Interoperability

  

  : VUAs could require significant changes to the Ethereum network architecture, which could be difficult to implement.

Counterparty’s XCP Solution

In a 2020 white paper, Counterparty (a decentralized organization) proposed an alternative solution using XCP (Ethereum Classic), a fork of the Ethereum blockchain. Their approach involved creating a new transaction type that would meet both the conditions: Proof of Burn and Unspendability.

Using custom transaction types and the proof-of-work algorithm, they demonstrated that it is indeed possible to create VUAs on Ethereum using XCP addresses. However, this solution is limited to the specific use case of the Counterparty fork and may not be easily transferable to other Ethereum-based networks.

Conclusion

While Ethereum has shown promise in implementing unspent verifiable addresses, significant technical challenges and scalability concerns need to be addressed before such a feature can be implemented. Developing VUAs on Ethereum will require the collaboration of experts from various fields, including cryptography, computer science, and blockchain engineering.

In the meantime, researchers continue to explore alternative solutions using other blockchain platforms or custom solutions that could better meet the requirements of unspent verifiable addresses.

Categorised in: CRYPTOCURRENCY

This post was written by Munna