Proof-of-Stake Blockchain Mining Games with Perfect Randomness
DescriptionLeading cryptocurrencies such as Bitcoin and Ethereum use Proof-of-Work (PoW) as its consensus mechanism. Due to high energy wast, Proof-of-Stake (PoS) emerged as an energy-friendly alternative to PoW. However, the adoption of PoS requires a better understanding of its economic and security implication. We study strategic mining under an ideal longest chain PoS consensus algorithm. In PoW, miners commit to an ancestor block during the mining phase. In PoS, we do not require miners to commit to an ancestor until blocks are published. In this setting, all PoW strategies are a valid PoS strategy, but PoS has a strictly larger strategy space. We study the implications of non-commitment to strategic mining. As our main contribution, we characterize optimal PoS mining strategies. Mainly, we reduce the problem of searching for optimal PoS mining strategies to the question of optimizing a Markov decision process. As a result, we show PoS allow strategies that are more profitable than all PoW strategies.