Vulnerability: Proof of Work vs. Proof of Stake

With all the talk about the future Proof of Stake version of Ethereum and the ever-splitting nature of Bitcoin due to developer community disagreements, a lot of us are left with many questions.

Primarily — why is proof of stake “better” than proof of work? Why are blockchain network and protocol decisions so contentious amongst developer teams? Why can’t someone break this down into readable english?

The former questions will always be up for debate, but I can help you with the latter. When it comes to vulnerabilities in any Blockchain system, you need to confront that system with a set of Consensus Protocol Conditions — simply put how incentivized and secure the guidelines of the blockchain system are. Here are the standard Consensus Protocol Conditions:

  1. A user who discovered a block should be encouraged to broadcast it over the network immediately and not hold it for himself

Based on these, and a few other comparative categories, let’s break down the advantages and disadvantages of PoS (Proof of Stake) and PoW (Proof of Work).

Note: These notes have been taken and simplified from Bitfury Group’s “Proof of Stake versus Proof of Work” White paper. They did an excellent job.

Cost of Execution/Attack

  • PoS has a lower barrier to entry for block generation rewards given that it’s system avoids of expensive computations. This makes it more environmentally friendly than PoW

Protocol ‘Fairness’

  • PoW protocol is fair in the sense that a miner with p fraction of the total computational power can win the reward and create a block with the probability p.

Maintaining Consensus

  • PoW — The process of solving a computational challenge imposed by a proof of work protocol is called (block) mining.

Shared Vulnerabilities

  • DoS Attacks — A DoS attack is aimed to disrupt the normal operation of the cryptocurrency network by flooding the nodes (PoW more vulnerable)

PoW Vulnerabilities

  • Selfish Mining Attack — In selfish mining, an attacker selectively reveals mined blocks in order to waste computational resources of honest miners.

PoS Vulnerabilities

  • Bribe Attack — (1) The attacker performs a spending transaction he wants to reverse later. (2) Immediately after the transaction, the attacker starts to build an alternative chain based on the block prior to the one containing the transaction. The attacker builds on the alternative chain in secret. (3) After the transaction gains the necessary number of confirmations (e.g., 6) and the attacker’s chain is longer than the valid chain, the attacker publishes it whole. The attacker’s chain is accepted as the new valid blockchain, and the transaction is reversed. PoS Bribe Attack cost 50x lower than PoW Bribe attack.

And that’s pretty much it! (As an overview at least). Regardless, many considerations need to be made when you develop ANY blockchain system!

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Robert Greenfield IV

CEO of Umoja Labs, Former Head of ConsenSys Social Impact, @Goldman Alum, @Cisco Alum, @TFA Alum, Activist, Intense Autodidact