Blockchain without Waste: Proof-of-Stake

Proof of Work vs Proof of Stake

Fahad Saleh and Wei Jiang

The Review of Financial Studies, 2021, vol. 34, issue 3, 1156-1190

Abstract: 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.

JEL-codes: C70 G00 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (46)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhaa075 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:34:y:2021:i:3:p:1156-1190.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().