[Mirror] A Proof of Stake Design Philosophy

2016 Dec 29 See all posts

[Mirror] A Proof of Stake Design Philosophy

This is a mirror of the post at https://medium.com/@VitalikButerin/a-proof-of-stake-design-philosophy-506585978d51

Systems like Ethereum (and Bitcoin, and NXT, and Bitshares, etc) are a fundamentally new class of cryptoeconomic organisms — decentralized, jurisdictionless entities that exist entirely in cyberspace, maintained by a combination of cryptography, economics and social consensus. They are kind of like BitTorrent, but they are also not like BitTorrent, as BitTorrent has no concept of state — a distinction that turns out to be crucially important. They are sometimes described as decentralized autonomous corporations, but they are also not quite corporations — you can't hard fork Microsoft. They are kind of like open source software projects, but they are not quite that either — you can fork a blockchain, but not quite as easily as you can fork OpenOffice.

These cryptoeconomic networks come in many flavors — ASIC-based PoW, GPU-based PoW, naive PoS, delegated PoS, hopefully soon Casper PoS — and each of these flavors inevitably comes with its own underlying philosophy. One well-known example is the maximalist vision of proof of work, where "the" correct blockchain, singular, is defined as the chain that miners have burned the largest amount of economic capital to create. Originally a mere in-protocol fork choice rule, this mechanism has in many cases been elevated to a sacred tenet — see this Twitter discussion between myself and Chris DeRose for an example of someone seriously trying to defend the idea in a pure form, even in the face of hash-algorithm-changing protocol hard forks. Bitshares' delegated proof of stake presents another coherent philosophy, where everything once again flows from a single tenet, but one that can be described even more simply: shareholders vote.

Each of these philosophies; Nakamoto consensus, social consensus, shareholder voting consensus, leads to its own set of conclusions and leads to a system of values that makes quite a bit of sense when viewed on its own terms — though they can certainly be criticized when compared against each other. Casper consensus has a philosophical underpinning too, though one that has so far not been as succinctly articulated.

Myself, Vlad, Dominic, Jae and others all have their own views on why proof of stake protocols exist and how to design them, but here I intend to explain where I personally am coming from.

I'll proceed to listing observations and then conclusions directly.

From here, there are of course many details and many ways to diverge on the details, but the above are the core principles that at least my version of Casper is based on. From here, we can certainly debate tradeoffs between competing values . Do we give ETH a 1% annual issuance rate and get an $50 million cost of forcing a remedial hard fork, or a zero annual issuance rate and get a $5 million cost of forcing a remedial hard fork? When do we increase a protocol's security under the economic model in exchange for decreasing its security under a fault tolerance model? Do we care more about having a predictable level of security or a predictable level of issuance? These are all questions for another post, and the various ways of implementing the different tradeoffs between these values are questions for yet more posts. But we'll get to it :)