Proofs in Local Protocol

Local protocol aims to address key challenges for decentralized physical infrastructure networks (DePINs) where services are limited by the availability or cost of proofs. We argue that the number of services that have hard cryptographic service-proofs is especially limited in physical networks, which has reduced the surface area and design space for DePIN in general. Local aims to expand this surface area for physical services that can be both peer-to-peer and token-incentivized.

Our approach acknowledges a spectrum of verifiability and provides a path forward for networks that may not have access to hard or cost-effective service proofs.

Local Protocol is an expressive architecture whose approach to verifiability is adaptable to a wide range of DePIN projects. In the root case, the protocol assumes that services do not have access to robust service-proofs.

Spectrum of Verifiability#

Proofs as Graph Attributes#

In graph theory, a node is a point representing an entity (buyer, seller), and an edge is a connection between two nodes (transactions). In Local protocol, we model identity-proofs (and other trust attributes for users) as node attributes and service-proofs as edge attributes.

We can assign a degree of confidence to such proofs and propagate the trust assumptions that we derive from each proof through the graph to neighboring nodes with a dampening factor over longer path lengths from the trusted node. This allows us to reduce the requirement of capturing potentially cost-prohibitive proofs for every transaction without sacrificing the security guarantee for the network.

You can think of both identity and service proofs as injecting trust into the network. As the network becomes more trustworthy, the protocol becomes more confident in distributing rewards that are greater than the fees collected for each transaction. This unlocks a rich surface area for capital formation to bootstrap new markets. New markets can inherit the security from existing markets providing the network with a strong cross-market network effect.

For immature local networks that want to prioritize bootstrapping trust, EC rankings can help establish trust vectors through a combination of service proofs and identity proofs. As the network grows and trust is established, the reliance on expensive service-proofs can be gradually reduced with a dampening factor over time.

Trust Propagation#

The boost in eigenvector centrality (EC) resulting from any proof—be it an identity proof or a service proof—doesn't just affect the individual node or transaction; it propagates through the network due to the recursive nature of the EC calculation. Nodes directly connected to the node or edge associated with the proof will also see an increase in their EC because their centrality depends on the centrality of their neighbors.

The effect of any proof diminishes exponentially over longer paths in the graph. The modified EC calculation naturally captures this phenomenon, as the solution to the inhomogeneous eigenvalue problem (more on this later) accounts for the additional trust introduced by the proofs (the doping vector for nodes or adjusted weights for edges).

You can visualize the network as a series of concentric circles centered around the node or edge that has incorporated a proof. The nodes directly connected form the first circle; these are the immediate neighbors who have direct interactions with the proof-bearing node or transaction. The second circle consists of nodes connected to those immediate neighbors, which are two steps away, and so on for subsequent circles. The influence of the proof's boost in eigenvector centrality is strongest at the center and decreases exponentially as you move outward.

Nodes that transact with those who have submitted proofs benefit more than they would have without the proofs. This results in higher rewards for both parties and increases their attractiveness as transaction partners in the network. In this way, nodes in the network might view the submission of proofs, and thus the increase in security for the network, as an investment in their EC. When self-interested actors perform actions that have positive security externalities, we achieve strong design properties.

Next Steps#

The upcoming sections will delve into specific types of proofs used in the protocol, such as Identity Proofs, Service Proofs, and Proofs as Probabilities, which collectively establish a more trustworthy decentralized marketplace.