So, what are some current implementations of PoS? The common example to better explain this proof is the following: If you have to stake your coins in PoS how can you make sure not to validate a fraudulent transaction I have a number of questions involved ethereum. To solve this issue, Buterin created the Casper protocol, designing an algorithm that can use the set some circumstances under which a bad validator might lose their deposit. One could get around this by embedding a fully-functional "light client" of the PoS chain into the PoW chain, which ethereum reject the double-anchoring, but this would require the PoW chain to be feature-rich enough to be able to implement such a client stake a property which most actually existing stake of work proof do not possess.
Light Clients and Proof of Stake Introduction. In the weaker version of this scheme, the protocol is designed to be Turing-complete in such a way that a validator cannot even tell whether or not a given transaction will lead to an undesired action without spending a large amount of processing power executing the transaction, and thus opening itself up to denial-of-service attacks. Only the early miners will see big profits. This resistance is not perfect , and there are ways to improve it. Absolute power corrupts absolutely.
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Short version - POW requires miners or physical computer to be turned stake and processing the transaction. Users can join this pool to be selected as the forger. So far, the situation looks completely symmetrical technically, even here, in the proof of stake case my destruction of coins isn't fully socially destructive as it makes others' coins worth more, but we can leave ethereum aside for the moment. This changes ethereum economic calculation thus: IS it possible that a forger might ending being on the wrong side unwillingly? Now, let us examine what a light stake needs proof do. My summary TL;DR summary is proof the comments.
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I thought that only Is Proof of Stake Gambling for Computers? With the gas price added to the returned money to miners, is that like interest? Proof of Stake Wallet Staking Implementation When Ethereum moves to proof-of-stake, will there be a way to stake multiple wallets? What does it mean to be 'bounded' I see this terminology everywhere in ethereum Wikis. What does it mean to be 'bounded'? Its a noob question I know. Implication of hacking into an ethereum node on proof of stake It is my understanding that in proof of stake, the validator puts up a stake that gets slashed if they don't respond to requests truthfully.
In the scenario that someone hacks into your node, wouldn't How does reward mechanism works on Proof-of-Authority consensus? By following this tutorial. I have created a private chain based on Proof-of-Authority. Please see my CustomGenesis. I have started my chain: Alper 1, 16 If all nodes follow this strategy, then eventually a minority chain would automatically coalesce that includes the transactions, and all honest online nodes would follow it.
The main weakness of such a scheme is that offline nodes would still follow the majority branch, and if the censorship is temporary and they log back on after the censorship ends then they would end up on a different branch from online nodes. Hence, this scheme should be viewed more as a tool to facilitate automated emergency coordination on a hard fork than something that would play an active role in day-to-day fork choice.
In any chain-based proof of stake algorithm, there is a need for some mechanism which randomly selects which validator out of the currently active validator set can make the next block. In non-chain-based algorithms randomness is also often needed for different reasons. There are several main strategies for solving problems like 3. The first is to use schemes based on secret sharing or deterministic threshold signatures and have validators collaboratively generate the random value.
The second is to use cryptoeconomic schemes where validators commit to information ie. There are two theoretical attack vectors against this:.
The third is to use Iddo Bentov's "majority beacon" , which generates a random number by taking the bit-majority of the previous N random numbers generated through some other beacon ie. Hence, all in all, many known solutions to stake grinding exist; the problem is more like differential cryptanalysis than the halting problem - an annoyance that proof of stake designers eventually understood and now know how to overcome, not a fundamental and inescapable flaw.
In this case, there now exist two incompatible finalized histories, creating a split of the blockchain, that full nodes would be willing to accept, and so it is up to the community to coordinate out of band to focus on one of the branches and ignore the other s. This coordination could take place on social media, through private channels between block explorer providers, businesses and exchanges, various online discussion forms, and the like.
The principle according to which the decision would be made is "whichever one was finalized first is the real one". Another alternative is to rely on "market consensus": In this case, the "first finalized chain wins" principle would be a Schelling point for what the market would choose.
It's very possible that a combination of both approaches will get used in practice. Once there is consensus on which chain is real, users ie. Another kind of attack is liveness denial: In this case, blocks would never finalize. If no blocks are finalized for some long period of time eg. In case 2 , the fork would once again be coordinated via social consensus and possibly via market consensus ie.
In the latter case, there is a strong argument that the market would want to choose the branch where "the good guys win", as such a chain has validators that have demonstrated their goodwill or at least, their alignment with the interest of the users and so is a more useful chain for application developers. One can imagine an implementation of 1 where nodes automatically accept a switch to a new validator set if they do not see a new block being committed for a long enough time, which would reduce the need for social coordination but at the cost of requiring those nodes that do not wish to rely on social coordination to remain constantly online.
In either case, a solution can be designed where attackers take a large hit to their deposits. This could range from a mild censorship attack which only censors to interfere with a few specific applications eg. There are two sub-cases. Here, we can program validators to refuse to finalize or build on blocks that they subjectively believe are clearly censoring transactions, which turns this kind of attack into a more standard liveness attack.
Here, the attacker can freely block any transactions they wish to block and refuse to build on any blocks that do contain such transactions. There are two lines of defense. First, because Ethereum is Turing-complete it is naturally somewhat resistant to censorship as censoring transactions that have a certain effect is in some ways similar to solving the halting problem. Because there is a gas limit, it is not literally impossible, though the "easy" ways to do it do open up denial-of-service attack vulnerabilities.
This resistance is not perfect , and there are ways to improve it. The most interesting approach is to add in-protocol features where transactions can automatically schedule future events, as it would be extremely difficult to try to foresee what the result of executing scheduled events and the events resulting from those scheduled events would be ahead of time.
Second, one can introduce the notion of an "active fork choice rule", where part of the process for determining whether or not a given chain is valid is trying to interact with it and verifying that it is not trying to censor you.
The most effective way to do this would be for nodes to repeatedly send a transaction to schedule depositing their ether and then cancel the deposit at the last moment. If the validator cartel censors their attempts to deposit, then nodes running this "active fork choice rule" would not recognize the chain as valid; this would collapse the censorship attack into a liveness denial attack, at which point it can be resolved through the same means as other liveness denial attacks. Hence, the recovery techniques described above will only be used in very extreme circumstances; in fact, advocates of proof of work also generally express willingness to use social coordination in similar circumstances by, for example, changing the proof of work algorithm.
Hence, it is not even clear that the need for social coordination in proof of stake is larger than it is in proof of work. In reality, we expect the amount of social coordination required to be near-zero, as attackers will realize that it is not in their benefit to burn such large amounts of money to simply take a blockchain offline for one or two days. This is an argument that many have raised, perhaps best explained by Paul Sztorc in this article. Hence, the theory goes, any algorithm with a given block reward will be equally "wasteful" in terms of the quantity of socially unproductive activity that is carried out in order to try to get the reward.
Locking up X ether in a deposit is not free; it entails a sacrifice of optionality for the ether holder. Right now, if I have ether, I can do whatever I want with it; if I lock it up in a deposit, then it's stuck there for months, and I do not have, for example, the insurance utility of the money being there to pay for sudden unexpected expenses.
I also lose some freedom to change my token allocations away from ether within that timeframe; I could simulate selling ether by shorting an amount equivalent to the deposit on an exchange, but this itself carries costs including exchange fees and paying interest. The answer is no, for both reasons 2 and 3 above. Let us start with 3 first.
So far, the situation looks completely symmetrical technically, even here, in the proof of stake case my destruction of coins isn't fully socially destructive as it makes others' coins worth more, but we can leave that aside for the moment.
The above included a large amount of simplified modeling, however it serves to show how multiple factors stack up heavily in favor of PoS in such a way that PoS gets more bang for its buck in terms of security.
The meta-argument for why this perhaps suspiciously multifactorial argument leans so heavily in favor of PoS is simple: In PoS, we are able to design the protocol in such a way that it has the precise properties that we want - in short, we can optimize the laws of physics in our favor.
The "hidden trapdoor" that gives us 3 is the change in the security model, specifically the introduction of weak subjectivity. In the case of capital lockup costs, this is very important. Hence, your marginal costs increase quickly. We can show the difference between this state of affairs and the state of affairs in proof of work as follows:.
Hence, the total cost of proof of stake is potentially much lower than the marginal cost of depositing 1 more ETH into the system multiplied by the amount of ether currently deposited. Note that this component of the argument unfortunately does not fully translate into reduction of the "safe level of issuance". It does help us because it shows that we can get substantial proof of stake participation even if we keep issuance very low; however, it also means that a large portion of the gains will simply be borne by validators as economic surplus.
However, exchanges will not be able to participate with all of their ether; the reason is that they need to accomodate withdrawals. Additionally, pooling in PoS is discouraged because it has a much higher trust requirement - a proof of stake pool can pretend to be hacked, destroy its participants' deposits and claim a reward for it.
On the other hand, the ability to earn interest on one's coins without oneself running a node, even if trust is required, is something that many may find attractive; all in all, the centralization balance is an empirical question for which the answer is unclear until the system is actually running for a substantial period of time.
With sharding, we expect pooling incentives to reduce further, as i there is even less concern about variance, and ii in a sharded model, transaction verification load is proportional to the amount of capital that one puts in, and so there are no direct infrastructure savings from pooling.
The only change is that the way the validator set is selected would be different: What is Proof of Stake Proof of Stake PoS is a category of consensus algorithms for public blockchains that depend on a validator's economic stake in the network.
What are the benefits of proof of stake as opposed to proof of work? No need to consume large quantities of electricity in order to secure a blockchain eg. Because of the lack of high electricity consumption, there is not as much need to issue as many new coins in order to motivate participants to keep participating in the network.
It may theoretically even be possible to have negative net issuance, where a portion of transaction fees is "burned" and so the supply goes down over time.
Proof of stake opens the door to a wider array of techniques that use game-theoretic mechanism design in order to better discourage centralized cartels from forming and, if they do form, from acting in ways that are harmful to the network eg. Reduced centralization risks , as economies of scale are much less of an issue. How does proof of stake fit into traditional Byzantine fault tolerance research? The key results include: CAP theorem - "in the cases that a network partition takes place, you have to choose either consistency or availability, you cannot have both".
The intuitive argument is simple: Note that the CAP theorem has nothing to do with scalability; it applies to sharded and non-sharded systems equally. FLP impossibility - in an asynchronous setting ie.
Note that this does NOT rule out "Las Vegas" algorithms that have some probability each round of achieving consensus and thus will achieve consensus within T seconds with probability exponentially approaching 1 as T grows; this is in fact the "escape hatch" that many successful consensus algorithms use.
Bounds on fault tolerance - from the DLS paper we have: Note that the "authenticated Byzantine" model is the one worth considering, not the "Byzantine" one; the "authenticated" part essentially means that we can use public key cryptography in our algorithms, which is in modern times very well-researched and very cheap.
Proof-of-stake PoS is a type of algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus. In PoS-based cryptocurrencies the creator of the next block is chosen via various combinations of random selection and wealth or age i. In contrast, the algorithm of proof-of-work PoW based cryptocurrencies such as bitcoin uses computationally intensive puzzles in order to validate transactions and create new blocks i.
Proof-of-stake must have a way of defining the next valid block in any blockchain. Selection by account balance would result in undesirable centralization, as the single richest member would have a permanent advantage.
Instead, several different methods of selection have been devised. Nxt and BlackCoin use randomization to predict the following generator, by using a formula that looks for the lowest hash value in combination with the size of the stake.
Peercoin 's proof-of-stake system combines randomization with the concept of "coin age", a number derived from the product of the number of coins times the number of days the coins have been held.
Coins that have been unspent for at least 30 days begin competing for the next block. Older and larger sets of coins have a greater probability of signing the next block. However, once a stake of coins has been used to sign a block, they must start over with zero "coin age" and thus wait at least 30 more days before signing another block.
Also, the probability of finding the next block reaches a maximum after 90 days in order to prevent very old or very large collections of stakes from dominating the blockchain. This process secures the network and gradually produces new coins over time without consuming significant computational power. Another form of staking is running a masternode [9]. The term masternode applies to any cryptocurrency which allows the decentralized use of servers, that can generate an income to the owner.
The main disadvantage of a masternode is the often relatively high entry point as opposed to staking alone. In order to secure the network, those willing to run a masternode are required to purchase a certain number of coins as collateral for whatever the market price is at the time.