Reliable randomness: Bringing on-chain entropy to the xDai Stable Chain

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Q) What do computer mouse movements, lava lamps, avalanches, and radioactive decay have in common?

A) They have all been used as sources of real-world randomness.

True randomness is impossible to achieve using only a computer. Input A always produces Output B, and this deterministic logic is repeatable and predictable. A random number should be unpredictable and independent of previous results, leaving applications to look outside of themselves to seed algorithms with real-world sources of randomness.

Public blockchains, however, are designed to function in a decentralized and trustless fashion, and not rely on outside, centralized factors. While a 3rd party oracle such as NIST can provide random numbers, this can also create a single point of failure and the need to trust a centralized, non-transparent (and thus manipulatable) source. It is better to facilitate random number generation on-chain, through decentralized processes.

Randomness is vital to maintaining a fair and autonomous transaction agreement process in a blockchain. While block producers are chosen based on the size of their investment and risk (for example their total mining rig power, or percentage of stake in the protocol), an element of chance should also exist. Randomness prevents manipulation, monopolization, and network takeover by a conspiring group of malicious nodes.

In Proof of Work (POW), randomness in block producers is built into the protocol. As Vitalik Buterin states, “the mining process in a random and unpredictable way “assigns” miners the right to create a block whenever they are lucky and discover a hash solution.” However, POW is resource intensive, and thus many protocols (including Eth 2.0) are shifting to a Proof of Stake (POS) type of protocol.

In POS, there is ...

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