A technical analysis of proof of stake based blockchain systems

Proof-of-work (PoW) based blockchain systems are not long-term solutions because of their high energy consumption problem. To eliminate this issue, a new consensus protocol is introduced; proofof-stake (PoS). This consensus mechanism depends on the peers' stake on the blockchain. However, this solution comes with new problems, one of them is the nothing-at-stake problem. The problem is due to the fact that clients can vote for any block on every fork they encounter because they don't lose anything by doing that, which creates an opportunity for double-spending, which in turn may cause more vulnerability. In this study, three PoS-based cryptocurrency protocols are analysed; Peercoin, Nxt and Ethereum's Casper in terms of how they secure the integrity of blockchain. Block structures, validation methods, checkpoint mechanism and penalty methods of all these three systems are investigated and compared. As a result, a generic design space of PoS system for solving the problem. The clients of all three systems need to have a stake on the blockchain to become a validator and they bet on with their stakes to validate next transaction blocks. The system should have these components to provide such consensus. Hashing protocol, to connect blocks to each other. Main chain protocol to correct the chain. The consensus mechanism should be updateable and the update should not ignore the old data. The system must have digital signature to determine the ownership of the transactions. The system must have a punishing and checkpoint protocol.