Proof of Stake (PoS)

A primary consideration regarding the operation of blockchain protocols based on proof of work (PoW) such as bitcoin is the energy required for their execution. Generating a single block on the bitcoin blockchain requires a number of hashing operations, which results in striking energy demands. It is important to point out that the proof of work mechanism of bitcoin facilitates a type of randomized “leader election” process that elects one of the miners to issue the next block. Furthermore, provided that all miners follow the protocol, this selection is performed in a randomized fashion proportionally to the computational power of each miner.

A natural alternative mechanism relies on the notion of “proof of stake” (PoS). Rather than miners investing computational resources in order to participate in the leader election process, they instead run a process that randomly selects one of them proportionally to the stake that each possesses according to the current blockchain ledger.

In effect, this yields a self-referential blockchain discipline: maintaining the blockchain relies on the stakeholders themselves and assigns work to them (as well as rewards) based on the amount of stake that each possesses as reported in the ledger. Aside from this, the discipline should make no further “artificial” computational demands on the stakeholders.

KIAYIAS, Aggelos, et al. Ouroboros: A provably secure proof-of-stake blockchain protocol. En Annual International Cryptology Conference. Springer, Cham, 2017. p. 357-388.