Proof of stake (PoS) is a hot topic in the blockchain community. But will it work out as expected?

A short primer on consensus history

Why would we need Proof of Stake consensus algorithm, instead of Proof of Work? In short, the answer is two-fold : scalability and resource-efficiency.

  • absence of shared memory: one has to solve a problem in terms of processes that individually have only a partial knowledge of the parameters associated with the problem. Each of the processes cooperating cannot have instantatenous knowledge of the current state of the other processes.
  • absence of accurate failure detection: it is impossible to distinguish between a slow processor and a failed processor.

Step 1 : classical consensus (for permissioned networks)

The challenges are well-known in the computing litterature. Major authors Leslie Lamport and Barbara Liskov received a Turing award due to their work on the subject. I would recommend the book from Vijay K. Garg, Elements of Distributed Computing, as a primer of the subject. Classical consensus algorithms offer quick finality and a set of guarantees for transactions that typically work well for a permissionned environment, where you know all the participants (typically for the range 10–1000).

Step 2 : Satoshi (for public/open networks)

Then came the famous (yet still unknown) Satoshi in 2008 with the bitcoin:

  • Throughput is also very limited. Bitcoin can process about 7 transactions per second which is not much compared to VISA for instance.
  • The mining consumes an enormous amount of energy (currently 42TWh/y ~a few nuclear plants, according to https://digiconomist.net/bitcoin-energy-consumption), corresponding to 450KWh for each transaction (~approx equivalent to 1.5 years of what your fridge consumes…).
  • The size of the blockchain only grows, requiring more storage. Currently it takes around 120G.
  • The decentralized ethos is challenged by reality, since mining power is centralized in a few facilities.
  • There’s also the challenge of transaction privacy, partially solved with the likes of Monero and Zcash.
  • chainweb is implementing a new architecture for interconnected PoW networks that would be able to scale to 1000s of transactions per second. Likewise, sharding networks is a usual suspect in many other projects to improve scalability.
  • some solutions for useful mining have been devised, such as filecoin or this interesting research paper to reduce the size of the chain.

POS to the rescue?

Alleluia, Proof of Stake (POS). The idea is to replace mining by an alternative, that scales more easily, provides quick finality and doesn’t need to mine and spend so much energy. Instead, let’s ask some validators to vote.

Source: https://blockgeeks.com/guides/blockchain-consensus/
  • Zilliqa – hybrid POW/POS
  • Thunder – POS with POW fallback
  • Cosmos – based on Tendermint’s delegated proof of stake (DPOS)
  • Polkadot – provides a framework called substrate to build blockchains, including POS variants (tendermint like or proof of authority)
  • Tezos – liquid proof of stake (a variant of DPOS)
  • EOS – a DPOS variant
  • Dfinity – threshold relay + probabilistic slot consensus
  • Algorand – byzantine agreement with leader election

Back to step 2? There may be an alternative.

As we’ve seen, consensus algorithms are a very active research topic. But I do think there’s a real and recent breakthrough.

Step 3: Avalanche (for public/open networks)

Avalanche is a new algorithm that might just change the status quo. According to the paper from Team Rocket published in may 2018, it provides:

  • Higher throughput: 1000–10,000 transactions per second depending on the adversarial scenario.
  • More sustainable than POW: it doesn’t require miners.
  • With an equalitarian role: more importantly, all participants are equal. There is no need for a leader or miners.

Sources

Before blockchain

S. Haber, W. S. Stornetta, How to time-stamp a digital document, Journal of Cryptology, January 1991, Vol. 3, Issue 2, pp 99–111, https://www.anf.es/pdf/Haber_Stornetta.pdf

Since blockchain

Satoshi, https://bitcoin.org/bitcoin.pdf

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