A Memo on the Proof-of-Stake Mechanism

Understand

We analyze the economic incentives generated by the proof-of-stake mechanism discussed in the Ethereum Casper upgrade proposal.

• Compared with proof-of-work, proof-of-stake has a different cost structure for attackers.
• In Budish (2018), three equations characterize the limits of Bitcoin, which has a proof-of-work mechanism.
• We investigate their counterparts and evaluate the risk of double-spending attack and sabotage attack.