STAKESURE: Proof of Stake Mechanisms with Strong Cryptoeconomic Safety (2401.05797v1)

Abstract: As of July 15, 2023, Ethererum, which is a Proof-of-Stake (PoS) blockchain [1] has around 410 Billion USD in total assets on chain (popularly referred to as total-value-locked, TVL) but has only 33 Billion USD worth of ETH staked in securing the underlying consensus of the chain [2]. A preliminary analysis might suggest that as the amount staked is far less (11x less) than the value secured, the Ethereum blockchain is insecure and "over-leveraged" in a purely cryptoeconomic sense. In this work, we investigate how Ethereum, or, more generally, any PoS blockchain can be made secure despite this apparent imbalance. Towards that end, we attempt to formalize a model for analyzing the cryptoeconomic safety of PoS blockchain, which separately analyzes the cost-of-corruption, the cost incurred by an attacker, and the profit-from-corruption, the profit gained by an attacker. We derive sharper bounds on profit-from-corruption, as well as new confirmation rules that significantly decrease this upper-bound. We evaluate cost-of-corruption and profit-from-corruption only from the perspective of attacking safety. Finally, we present a new "insurance" mechanism, STAKESURE, for allocating the slashed funds in a PoS system, that has several highly desirable properties: solving common information problem in existing blockchains, creating a mechanism for provably safe bridging, and providing the first sharp solution for automatically adjusting how much economic security is sufficient in a PoS system. Finally, we show that the system satisfies a notion of strong cryptoeconomic safety, which guarantees that no honest transactor ever loses money, and creates a closed system of Karma, which not only ensures that the attacker suffers a loss of funds but also that the harmed parties are sufficiently compensated.

• The paper introduces STAKESURE, an economic staking insurance model that reallocates slashed funds to compensate honest users and secure PoS blockchains.
• It employs a detailed mathematical model to compare cost-of-corruption and profit-from-corruption, revealing vulnerabilities in traditional PoS systems.
• The study demonstrates practical implications for robust blockchain bridges and a scalable, self-adjusting economic defense mechanism.

An Analytical Review of STAKESURE: Enhancing Cryptoeconomic Security for Proof-of-Stake Blockchains

This paper presents a comprehensive paper on the cryptoeconomic safety of Proof-of-Stake (PoS) blockchains, specifically addressing the perceived disparity between the total-value-locked (TVL) and the amount staked for securing the consensus. The authors introduce STAKESURE, an innovative mechanism designed to enhance this security through an insurance-like structure, overcoming the traditional vulnerabilities of PoS systems.

Core Concepts and Model

The paper begins by dissecting the apparent vulnerability of Ethereum, where the value secured significantly outweighs the amount staked. Two key economic metrics are introduced: cost-of-corruption and profit-from-corruption. The cornerstone of their argument is the necessity for cost-of-corruption to exceed profit-from-corruption to assure cryptoeconomic safety. Current security strategies such as slashing increase the cost of corruption, but the paper suggests this alone is insufficient for ensuring strong cryptoeconomic safety, as it doesn't directly compensate honest users who suffer losses in an attack.

Introduction of STAKESURE

STAKESURE is proposed as an economic mechanism to provide staking insurance, aiming to address the security insufficiencies of conventional approaches. By reallocating slashed funds as insurance to compensate honest parties, it creates a closed “Karma” system. This ensures that potential attackers not only lose their stake but also have no profit motive, while honest parties are ensured financial protection.

Cost and Profit Analysis

The authors employ a detailed mathematical model to calculate and analyze the potential costs and profits associated with a PoS blockchain attack. This includes examining token toxicity and slashing as deterrents to malicious behavior. Despite token toxicity offering zero additional cost to adversaries, slashing provides a quantifiable economic penalty for attacks, increasing the adversary's cost.

Moreover, the analysis extends to defining transactions vulnerable to chain reorgs and setting robust confirmation rules for hybrid transactions that blend on-chain activities with off-chain actions. By reducing the reversion window where adversarial forks may occur and requiring off-chain actions to be executed only post-confirmation, the STAKESURE mechanism significantly limits profit-from-corruption possibilities.

Implications and Practical Implementation

The implications of STAKESURE are multifold. Practically, it paves the way for robust, secure bridging across blockchain networks, which has historically been a vulnerability. It facilitates a self-scaling security model where the economic security correlates with the volume of transactions, alleviating constant emission of staking rewards to incentivize security. This mechanism seamlessly integrates with existing blockchain infrastructure, allowing incremental adoption without disrupting underlying consensus protocols.

Theoretical and Future Considerations

Theoretically, the paper challenges existing blockchain security models by incorporating economic incentives into the security paradigm, suggesting a paradigm shift in ensuring blockchain safety. The mechanism provides a blueprint for further research into insurance analogs for blockchain technology, suggesting that future protocols could incorporate dynamic cryptoeconomic defense strategies that automatically adjust to the underlying network conditions and potential threats.

Conclusively, the paper highlights a significant advancement in blockchain security strategy, outlining a clear pathway to achieving strong cryptoeconomic safety for PoS systems. STAKESURE's ability to align economic models with security concerns provides both theoretical backing and practical tools for developers and researchers to enhance the security framework within which blockchains operate. Further research and empirical studies on real-world blockchain networks will be essential to validate and refine this proposed mechanism, potentially setting a new standard in decentralized security policy.