This post is part of a series that compares Ardor to other blockchain projects with similar features or goals. You can find the previous posts here:
This week I studied NEM, a public blockchain similar to Nxt in many ways. As I’m primarily interested in each blockchain project’s approach to scaling, I also researched Mijin, a version of NEM for private blockchains, and Catapult, a rewrite of Mijin which promises large performance gains and which will also be incorporated into future releases of NEM.
Although NEM’s core developers abandoned their initial plan to start NEM as a fork of Nxt, choosing instead to start the project from scratch, NEM and Nxt are still fairly similar. Like Nxt, the NEM platform provides a predefined set of allowed transactions which applications can use as building blocks to create more complex features, as opposed to using a low-level scripting language to construct transactions, like Bitcoin or Ethereum.
Both platforms support a variety of “blockchain 2.0” features, like sending messages, creating and transfering assets, and sending transactions requiring the approval of multiple accounts (m-of-n multisig). And both platforms expose their functionality through HTTP-based APIs, so developers can use virtually any language to write applications for them.
Despite these similarities, NEM also has some notable differences compared to Nxt.
Perhaps the most fundamental one is its novel consensus algorithm, called proof-of-importance. This algorithm is similar to proof-of-stake, except the probability that an account may harvest (i.e., forge) the next block depends not only on its stake of XEM, which is the native coin on NEM, but also on how recently it has transacted with other accounts and how much XEM was exchanged. Accounts that hold a large stake of XEM and which transact frequently and in high volume harvest more blocks than accounts with less XEM or accounts which only rarely transact.
The authors of the NEM Technical Reference argue that, compared to proof-of-stake, the proof-of-importance algorithm gives somewhat less weight to the wealthiest accounts when determining the right to forge/harvest the next block (Section 7.8). Proof-of-importance is also central to NEM’s spam filter, which requires that an attacker not only control a lot of accounts, which is easy to do, in order to spam the network with a large number of unconfirmed transactions, but also to hold a large stake in each account and transact frequently with other high-importance accounts.
In my view, another main difference between NEM and Nxt is the extent to which each platform’s “blockchain 2.0” features are integrated directly into the API. For example, NEM’s assets, called “mosaics,” share several features with the Nxt Monetary System’s currencies, but NEM does not have a built-in decentralized exchange for mosaics. (As a side note, the NEM Foundation has contracted with Blockchain Global to create a traditional, centralized exchange featuring mosaic-based ICO tokens.) Similarly, while you could certainly build a decentralized marketplace on top of NEM where users could buy and sell goods and services, NEM does not have such a marketplace built into its API the way that Nxt does.
Finally, one subtle but very important difference between NEM and most other blockchains, including Nxt, is the way that it handles multisignature transactions. Instead of allowing any account to generate a multisig transaction, NEM introduces the concept of a multisig account and requires that all multisig transactions originate from such accounts. Any co-signatory on the account can initiate a transaction from it, and the transaction is only executed if a sufficient number of the other co-signatories approve it.
At first this might appear to be a limitation, since it requires a separate multisig account for each set of co-signatories a user wants to cosign with, but it has two key advantages: the multisig account is a full account, capable of receiving payments, messages, and mosaics, for example; and co-signatories can be added and removed, so custody of the multisig account can be transferred. It is possible to create a “1-of-1” multisig account, i.e., an account with a single custodian who can transfer it to a different custodian if desired. In this way, multisig accounts on NEM can act like transferable containers for XEM, mosaics, and messages.
One particularly impressive application of this concept is a notary service built on NEM called Apostille. With Apostille, the process of notarizing a document looks like this:
- Hash and sign the name of the document.
- Create a multisig account for the document derived from the resulting signature.
- Hash and sign the contents of the document.
- Send a message containing the result to the document’s multisig account.
Note that the last step also attaches a timestamp to the document, since the transaction that transfers the document’s signed hash to the multisig account is recorded on the blockchain.
As an example of a potential application of Apostille, the authors of the white paper consider a case where the notarized document is a car title. Ownership of the car can be transferred by changing co-signatories on the multisig account that contains the title; messages describing maintenance and repairs can be sent to the multisig account to record the car’s service history; and mosaics issued by governments or insurers could attest to payment of fees. In this way, the multisig account represents both the car itself and the history of other accounts’ interactions with it.
Anyway, that’s quite enough about NEM. Next, Mijin.
At a high level, Mijin is a version of NEM that three of the core NEM developers and a company called Tech Bureau developed as a private, permissioned blockchain product. Like any private blockchain–and in contrast to NEM, which is public–a Mijin blockchain is owned and controlled by a central authority, such as a company.
This isn’t the place for a full debate about the utility of private blockchains, but as Mijin and Catapult are an important part of the NEM ecosystem, please indulge me for a minute. In my opinion, the more “private” a private blockchain becomes, the less useful it is. While I can see a case to be made for “consortium” blockchains, where a handful of independent organizations who don’t necessarily trust each other cooperate to secure the network against abuses by any one member of the group, I have trouble seeing the value in a blockchain controlled by a single authority. In my view, a blockchain without trustless consensus is basically just an extremely slow, extremely inefficient database.
I know there are plenty of people who disagree with me, though, so for the remainder of this post I’m going to assume private blockchains have value and that there is a market for them, especially in financial services, which seems to be the main industry that Tech Bureau intends for Mijin to serve.
There is not nearly as much information about Mijin available on the internet as there is about NEM, but I did learn some interesting facts that hint at its potential. For one thing, although Mijin and NEM are completely separate projects, Mijin does share the NEM API (or at least the two APIs overlap substantially), which suggests that it will be relatively easy for developers to write applications that run on either platform. The common API might also facilitate interactions between Mijin chains and the public NEM chain, but I haven’t found any information about the details of those interactions.
Additionally, the Mijin website states that Mijin will support smart contracts, though the Catapult white paper seems to slightly contradict that statement when it says, “the approach here is to make the smart contract an external component, whether centralized (i.e., status quo with existing systems) or decentralized. The outputs of these smart contracts will then enter their transactions into the ledger through a secure transaction process.” To me, this implies that the contracts themselves will be neither stored on the blockchain nor executed by all nodes on the network.
Speaking of Catapult…
Catapult is a rewrite of Mijin with a focus on increasing the rate at which transactions can be confirmed. Judging from the white paper (linked above), the first deployments of Catapult will be at banks and other financial institutions, where the author envisions it will replace patchworks of “disjointed monolithic systems” that he says are commonly used today. Eventually, the developers also plan to integrate Catapult into NEM to facilitate scaling the public blockchain as well.
Like Mijin, Catapult is currently closed-source and many technical details are not public. I was able to find some good information digging around the NEM blog, though, especially in this thread by one of the developers.
Catapult divides the work that the network does among three types of nodes:
- P2P nodes, which add new blocks to the blockchain and maintain consensus about its state;
- REST nodes, which present client applications with all the features they can use from the Catapult API; and
- API nodes, which, like P2P nodes, store the blockchain and can read directly from it (I think), but which do not add blocks to it. These nodes serve data to the REST nodes to fulfill client applications’ requests.
This breakdown appears to roughly correspond to the three-tier architecture commonly used for web applications, where the blockchain (P2P nodes) is the database, the REST nodes are the front-end, and the API nodes handle the business logic of interpreting and interacting with data in the database.
If this analogy is correct, then presumably the goal of this architecture is to allow each tier to scale independently. Especially for a private blockchain, the optimal number of P2P nodes used to establish consensus might be much smaller than the number of REST and API nodes required to handle all of the requests that applications send to the network. Delegating these responsibilities to separate nodes on the network should allow nodes of each type to be added or removed as needed to optimize performance.
Apart from this new architecture, Catapult also makes some other optimizations to improve performance. Whereas Mijin and NEM are written in Java and use HTTP for communicating with full nodes, Catapult is being written in C++, and communication between at least the API nodes and REST nodes uses full-duplex sockets (via ZeroMQ), potentially allowing for lower latency than HTTP.
A performance test of three Catapult nodes located in the same datacenter and configured to service requests from 10.8 million accounts showed that the network was able to process just over 3,000 transactions per second. It isn’t completely clear from the press release, but it sounds like each of the three nodes in this test played all three roles: P2P, API, and REST. Confusingly, the accompanying diagram appears to refer to API nodes as “blockchain data ingestion servers” and to REST nodes as “API gateway” servers.
Compared to Ardor
How does NEM compare to Ardor, then?
Really, there are (at least) two separate questions: how do NEM’s features compare to Ardor’s features? And how does NEM’s approach to scaling compare to Ardor’s approach?
Since Ardor (the platform, not the parent chain) will support all of Nxt’s current features, the comparisons I noted above between NEM and Nxt apply equally well to Ardor.
In particular, Ardor’s child chains will have at their disposal a somewhat larger variety of built-in transaction types that support a richer set of features.
For example, NEM does not natively support a peer-to-peer exchange for mosaics, dividend payments to mosaic holders, transactions conditioned on votes by mosaic holders (or most of Nxt’s phased transaction types, for that matter), account properties, a decentralized marketplace, or anything like Nxt’s shuffling and alias systems.
Ardor’s parent-chain/child-chain architecture will add some extra functionality, too.
In particular, users will be able to exchange different child chain tokens for one another directly, without first converting to ARDR. This will be especially useful on pegged child chains, where users will be able to trade dollar-pegged coins directly for bitcoin-pegged coins (for example), whereas on NEM, somebody holding a dollar-pegged mosaic would have to sell it for XEM, then buy a bitcoin-pegged mosaic.
These differences notwithstanding, NEM still offers a rich set of features that application developers can use in interesting ways. Perhaps the best example is Apostille’s creative use of NEM’s unique multisig accounts. I’m not sure how easy it would be to replicate that kind of functionality on Ardor.
[EDIT]: Lior Yaffe, core dev and co-founder of Jelurida, has the following comment:
With NXT this can be achieved by issuing a singleton asset for each license registration and sending it between accounts.
On the question of how to scale, the two platforms differ much more dramatically.
Catapult’s approach, which NEM will eventually incorporate, is twofold: a new three-tier architecture to distribute the network’s responsibilities among three specialized types of nodes; and a series of application-level optimizations, e.g., using C++ instead of Java. We will need to defer judgment of the latter approach until additional benchmarking tests are available, but we can still cautiously speculate about the implications of the new architecture.
The biggest advantage seems to be for private blockchains, where the owner can fine-tune the quantities of the three types of nodes and the topology of the network to optimize throughput. Moreover, in such a context, blockchain bloat isn’t as severe a problem as it is for a public blockchain since companies can easily dedicate terabytes of storage on their servers to storing the blockchain.
The improvement in NEM’s performance with this new architecture, on the other hand, is much harder to predict. It is not clear whether each peer on the network would have to run all three services (P2P, API, REST) or just one of the three. In the former case, the scaling advantage to the new architecture would presumably be lost. In the latter case, the classic trade-off between speed (fewer P2P nodes, more API and REST nodes) and security (greater fraction of P2P nodes) would remain. And since nobody could control the number of each type of node on a public network, the question of what the optimal balance is would be moot.
In contrast, Ardor’s design does not try to achieve the highest possible throughput, at least initially. Rather, Ardor’s main scaling goal is to greatly reduce the size and rate of growth of the blockchain. It does this using a unique parent-chain/child-chain architecture, where all nodes on the network validate all transactions, but only those belonging to accounts holding the parent chain coin (ARDR) forge. Since the child chain coins can’t be used to forge, the child chains’ transaction history is irrelevant to the security of the network and can be pruned away.
It is worth noting, however, that computational scaling is on the Ardor roadmap.
Specifically, it is possible that child chain transaction processing will be delegated to separate subnets of the Ardor network in the future, allowing most nodes to ignore most transactions.
Ardor and NEM both offer rich, largely overlapping sets of features.
Overall, my impression is that developers will probably be able to build similarly complex applications on either blockchain with comparable ease. In that sense, the two platforms are direct competitors.
In their approaches to scaling, though, Ardor and NEM are quite different.
While Catapult will likely achieve a significant improvement in the rate that private blockchains can confirm transactions, I am somewhat more skeptical of the performance improvement that can be achieved on a public blockchain like NEM using the same approach.
Ardor, on the other hand, does not attempt to address the computational scaling problem (for now), but has found a very effective solution to the problem of blockchain bloat.
I suppose time will tell whether computational scaling or blockchain bloat is ultimately going to pose the biggest long-term problem for blockchain tech, and time will also tell whether either platform has found an adequate solution.
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