Blockchain without Waste: Proof-of-Stake

By Fahad Saleh. The Review of financial studies, 2020

716 citations recorded by the source corpus.

Permissionless blockchains require a protocol to generate consensus. Many prominent permissionless blockchains employ Proof-of-Work (PoW) for that purpose, but PoW possesses significant shortcomings. Various alternatives have been proposed. This paper provides the first formal economic model of the most famous alternative, Proof-of-Stake (PoS), and establishes conditions under which PoS generates consensus. A sufficiently modest reward schedule not only implies the existence of an equilibrium in which consensus obtains as soon as possible but also precludes a persistent forking equilibrium. The latter result arises because PoS, unlike PoW, requires that validators are also stakeholders.

Subfields: Information Systems

View Paper: https://www.semanticscholar.org/paper/03d1b883e9d8474212094e5764646bc6450cf565

How researchers see this paper

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In Information Systems

1. Karl Andersson
2. Yukun Liu
3. Olov Schelén
4. Ahmed Afif Monrat
5. Aleh Tsyvinski

Citations in the corpus

• Central Bank Digital Currency: When Price and Bank Stability Collide (2020, neutral): “, 2017; Prat and Walter, 2018), the micro and macroeconomics of blockchain (Amoussou-Guenou et al., 2019; Biais et al., 2019a,b; Ebrahimi et al., 2019; Leshno and Strack, 2020; Saleh, 2020) and token issuance (Cong et al.”
• Tokenomics: Dynamic Adoption and Valuation (2020, neutral): “This is because the more decentralized a network is, the longer it takes to reach consensus (e.g., Hinzen, John, and Saleh 2020).”
• Risks and Returns of Cryptocurrency (2018, background): “Moreover, a number of recent papers develop models of cryptocurrencies (see, e.g., Weber 2016; Huberman, Leshno, and Moallemi 2017; Biais et al. 2018; Chiu and Koeppl 2017; Cong and He 2019; Cong, Li, and Wang 2019; Cong, He, and Li 2018; Sockin and Xiong 2019; Saleh 2018; Schilling and Uhlig 2019; ”
• A Survey of Blockchain From the Perspectives of Applications, Challenges, and Opportunities (2019, background): “Instead, it relies on having an adequate stake in the system to participate in the block creation process [56].”
• On the Financing Benefits of Supply Chain Transparency and Blockchain Adoption (2020, background): “work laid out by Spence (1973) reveals that this may or may not be the case.”