It occurred to me that we could push the classic concept of pruning even further: we could significantly shrink the blockchain as well as reduce the amount of network traffic during initial block download by doing something I would call protocol-level pruning. This would, as of today, reduce the size of the blockchain by a factor of 50, hence enabling massive on-chain scaling.
The idea behind PLP is to serialize the UTXO set in a standardized way, and publish a hash of it in the block header so that the blockchain commits to it. Since hashing and verifying it is a moderately intensive operation, perhaps the UTXO set hash should be published only once every 576 blocks (4 days).
When a new Bitcoin node joins the network, it would download the block headers only (not the block data), it would identify the most recent block containing the UTXO set hash, and download the UTXO set from peers. From that point on, it downloads and verifies all blocks as normal.
Every 576 blocks, nodes serialize and verify that their UTXO set hash matches the one published in the blockchain. Doing so becomes a new part of consensus rules. The last 576 blocks could then be permanently discarded as they are no longer useful.
Today the serialized UTXO set is about 3GB and the blockchain is about 150GB. Therefore PLP would cut down the amount of data stored by full nodes by a factor of ~50 as they would have to store only the UTXO set plus at most 576 blocks.
One trivial optimization is possible: to avoid hashing the entire UTXO set every 576 blocks (which would take multiple seconds even on a fast machine), the UTXO set serialization could be a
sparse merkle tree which would allow on-the fly recomputation of the hash as new blocks are mined: when a UTXO is added to (or removed from) the tree, only a small number of hash operations are needed to recalculate the UTXO set merkle tree root hash.
Maybe we don't even need sparse merkle trees, but a regular merkle tree would suffice: the tree leaves would be small groups of UTXOs (some bits in the ID/hash of a UTXO would determine which leaf it belongs to.)
Unlike classic pruning mode, ALL full nodes on the network could switch to PLP. There is no need for any node to archive the entire blockchain any more.
I can think of one downside of PLP: nodes would no longer be able to handle reorgs that go further back than the last UTXO set hash published on the chain (since previous blocks have been discarded). So, perhaps keeping around the last N*576 blocks (N=10?) would be a sufficient workaround.
Thoughts?
-Marc