Privacy-focused networks share a rich tradition, each building and innovating upon the other to enable users to conceal and anonymize data. Outpacing entities who develop loopholes and exploits to engage in surveillance of internal network activity requires constant patching, making the upkeep of anonymity protocols expensive.
The elite class of privacy-focused networks most notably includes the TOR browser. TOR’s primary aim is to provide privacy and security simply by hiding where TOR users are communicating from. Despite several weaknesses which have been exploited through its history, TOR has maintained a lofty reputation for providing ordinary people with privacy tools. At various times, intelligence agencies from around the world have both funded and attempted to undermine the integrity of TOR’s network.
Tor separates identification and routing using onion routing, which encrypts and then randomly bounces communications through a relay network. The sustainability of this system depends on the goodwill of roughly 7000 volunteers who are relaying and utilizing the network. Considering the bandwidth costs of running a Tor node, which could cost thousands of dollars per month, one has to wonder who is incentivized to run one, and how anyone can remain anonymous in the process of doing so. Tor’s reputation might even provide strong disincentives from relaying data, as it could essentially put a target on the back of the node runner.
HOPR, a privacy-focused cryptocurrency project which utilizes onion routing in the same vein as TOR, wants to provide a solution to this incentive problem. Since encrypting, mixing, and relaying data is an expensive process, and relying on a central authority to distribute funds could prove logistically nightmarish, HOPR developed an incentive structure that leverages its own network to pay the node runners for relaying user data. HOPR provides rewards in the form of their own native cryptocurrency known as $HOPR. In this network, relayers receive their payment in the data packet as they are relaying, then as each relayer unwraps the packet, they can claim their share of the payment.
In order to prevent metadata leakages along the way, the HOPR protocol uses a lottery-like system with randomized rewards. HOPR’s most unique feature, known as proof of relay, is what makes HOPR a truly trustless network. Proof of Relay makes each pair of nodes in a chain reliant on each other in order to claim payment. As data is sent through HOPR’s network, a payment is generated for each node in the chain, which is then locked with a cryptographic key. The payments are split into two halves and each pair of nodes needs to exchange their halves in order to access the payment.
HOPR’s incentive structure is unique because node runners are not motivated by altruism but financial self-interest to cooperate amongst each other. HOPR couples TOR’s battle-tested onion routing system with the general economic principle that greater incentives lead to greater efforts. Among privacy-focused companies, HOPR’s architecture makes it stand out as one of the most groundbreaking.
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