Opinion on proof of stake in future

Summary:

The discussion revolves around the security issues with Proof of Stake (PoS) protocol in comparison to Proof of Work (PoW) in decentralized consensus, and how to solve them. One of the problems is "nothing at stake," where anyone can mint on any chain which leads to an attack vector. The introduction of punishment does not solve this completely, and it also introduces additional complexity that may create problems. The attacker's position improves even with a small percentage of the stake, and they have a significant advantage in the number of blocks they create compared to honest nodes. This means the attacker's stake increases faster than the honest nodes in the long term, making PoS critically insecure.Additionally, the optimal scenario with all existing coins participating is theoretical, and stakers who do not make mistakes or are wealthy enough to afford not selling their positions will gain significance over time. As long as the staker makes sure not to miss a chance to create a block, her significance in the system increases relative to other normal users who do not stake and other stakers who make mistakes. The technique described allows the attacker to gain an advantage and put them in a greater position of control. Introducing DDOS opportunity with medium-level difficulty for the attacker to implement it, in case of "quorum-based PoS" is not a problem anywhere near the same level of significance. It allows the attacker to turn off the network if they spend some time and money, making it unacceptable. Therefore, PoS must be rejected as being critically insecure until someone invents and demonstrates an actual way of solving these issues.Proof-of-burn (PoB) is a consensus mechanism used in cryptocurrency that ties burn investment to a future particular block height, meaning if someone burns coins for block 553, they can only use them to mine block 553 and cannot mine on any other chain deterministically. PoB eliminates the "nothing at stake" problem, which occurs during forks and when miners have an incentive to mine all chains. In contrast, PoS incentivizes validators to hold large amounts of coins online, which creates new social attack surfaces and risk of censorship, as well as privacy concerns. PoS also requires the association of UTXOs with staking accounts, which ruins the main privacy advantages of the UTXO model. PoB is simpler, more secure, and harder to censor and trace since it doesn't require a live, well-connected node. PoB also solves problems created by energy dependence and state monopolies on mining.A recent bitcoin-dev thread discussed the potential for Proof of Stake (PoS) as a consensus protocol. While some argue that PoS is worse in the event of a 51% attack, others believe that PoS could be implemented with substantially higher security while costing less resources than Proof of Work (PoW). Some criticisms of PoS are out of date or rely on unproven assumptions. The tendency towards oligopolistic control is actually worse for PoW due to its centralization pressure and barriers to entry. Energy usage is not necessarily problematic, but it is important to consider whether Bitcoin can do better.One claim against PoS is that it tends towards oligopolistic control, but there is no centralization pressure in PoS mechanisms. However, obtaining tokens in PoS requires permission from someone else. Another criticism is that PoS requires a trusted means of timestamping to regulate overproduction of blocks, but this is true for both PoW and PoS. It is also argued that PoS is only resilient to 1/3 of the network demonstrating a Byzantine Fault, whereas PoW is resilient up to the 1/2 threshold. However, there are PoS designs that should exceed that up to nearly 50%. Some believe that PoS could be used for a trustless digital cash, although others argue that PoS requires other trade-offs that are incompatible with Bitcoin's objective, such as the famous "security vs. liveness" guarantee. While energy usage is not inherently problematic, it is important to consider whether Bitcoin can do substantially better.The "nothing at stake" problem in proof of stake (PoS) allows for certain behavior that is not possible in proof of work (PoW) because there is minimal energy involved. A malicious actor can create blocks anywhere if they follow the consensus rules for their structure. This attack violates the linearity of power among stakers in the system and can be used to produce multiple forks, gaining an extra block over the honest strategy. The attacker can not be punished because the production was local and only the final result was published. Possible solutions to this problem include programming all honest clients to mint selfishly and requiring additional signatures from outside validators on each block.The vulnerability described in PoS also exists in PoW through the selfish mining attack, but the levels of advantage and cost of attacking the system need to be compared to know which system is better.

Updated on: 2023-06-14T21:04:39.133867+00:00