May 1, 2017 by Christian Seberino
Proof of work systems are widely used and have been accurately scrutinized. There is concern that funds will be at risk if proof of work systems are substituted with proof of stake systems. Fortunately, proof of stake systems can improve security rather than menacing it!
In proof of work systems, volunteers assist in the creation and validation of fresh blocks. Prizes are proportional to the amount of computing resources contributed to the process. There are built in disincentives for acting maliciously or foolishly. For example, contributing computing resources to losing chains will lead to financial losses.
Proof of stake systems attempt to keep the benefits of proof of work systems while eliminating the problems. There are numerous varieties and much ongoing research. Volunteers still assist in the creation and validation of fresh blocks. Prizes are proportional to the amount of funds (stakes) temporarily placed in escrow. There are still built in disincentives for acting maliciously or foolishly. For example, some systems confiscate escrowed funds if volunteers at the same time work on numerous chains.
Proof of stake systems can strengthen proof of work systems rather than substituting them. They can simply add extra steps to the process of approving candidate blocks. This is analogous to adding a 2nd lock on a door. Extra protections are welcome because proof of work systems are vulnerable to participants who control a majority of the computing resources. This can lead to 51% attacks:
“[A] mining pool — an association of people who own specialized hardware that produces Bitcoins by running specific mathematical operations — gained a 51 percent share of computing power used in currency production. That gave it the power to switch roles transactions, to pay twice with the same Bitcoins, and to delay or even cancel other people’s transactions. The pool was GHash.io, run by a secretive U.K.-incorporated garment called CEX.io”
“I am Chandler Guo, a 51% attack on Ethereum Classic (ETC) is coming with my 98G hashrate. This is toughly Trio times [the] current ETC network hashrate. This is an activity to against Poloniex’s decision to support ETC.”
Such attacks might not be possible with proof of stake system additions.
It is possible that vulnerabilities might be found in proof of stake systems. Albeit combining proof of work and proof of stake systems would likely be beneficial, there might still be problems. This is analogous to losing the key to a 2nd door lock. Numerous door locks provide extra security, but, they also increase the chances of denying yourself access.
Proof of stake systems do not necessarily have to eliminate proof of work systems. Blockchain systems can at the same time bounce security and innovation.
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I would like to thank IOHK (Input Output Hong Kong) for funding this effort.
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