A Survey on Consensus Mechanisms and Mining Strategy Management in Blockchain Networks <s> B. Issues of Incentive Compatibility in PoS <s> We study decentralized cryptocurrency protocols in which the participants do not deplete physical scarce resources. Such protocols commonly rely on Proof of Stake, i.e., on mechanisms that extend voting power to the stakeholders of the system. We offer analysis of existing protocols that have a substantial amount of popularity. We then present our novel pure Proof of Stake protocols, and argue that they help in mitigating problems that the existing protocols exhibit. <s> BIB001 </s> A Survey on Consensus Mechanisms and Mining Strategy Management in Blockchain Networks <s> B. Issues of Incentive Compatibility in PoS <s> We propose a new protocol for a cryptocurrency, that builds upon the Bitcoin protocol by combining its Proof of Work component with a Proof of Stake type of system. Our Proof of Activity protocol offers good security against possibly practical attacks on Bitcoin, and has a relatively low penalty in terms of network communication and storage space. <s> BIB002 </s> A Survey on Consensus Mechanisms and Mining Strategy Management in Blockchain Networks <s> B. Issues of Incentive Compatibility in PoS <s> It is a widely spread belief that crypto-currencies implementing a proof of stake transaction validation system are less vulnerable to a 51% attack than crypto-currencies implementing a proof of work transaction validation system. In this article, we show that it is not the case and that, in fact, if the attacker’s motivation is large enough (and this is common knowledge), he will succeed in his attack at no cost. <s> BIB003 </s> A Survey on Consensus Mechanisms and Mining Strategy Management in Blockchain Networks <s> B. Issues of Incentive Compatibility in PoS <s> We present “Ouroboros”, the first blockchain protocol based on proof of stake with rigorous security guarantees. We establish security properties for the protocol comparable to those achieved by the bitcoin blockchain protocol. As the protocol provides a “proof of stake” blockchain discipline, it offers qualitative efficiency advantages over blockchains based on proof of physical resources (e.g., proof of work). We also present a novel reward mechanism for incentivizing Proof of Stake protocols and we prove that, given this mechanism, honest behavior is an approximate Nash equilibrium, thus neutralizing attacks such as selfish mining. <s> BIB004
Regarding the incentive compatibility of PoS, an informal analysis in BIB004 shows that being honest is a δ-Nash equilibrium 20 strategy when the stakes of the malicious nodes are less than a certain threshold and the endorsers are insensitive to transaction validation cost. However, a number of vulnerabilities are also identified in PoS. In  , the nothing-atstake attack is considered. In order to maximize the profits, a block leader could generate conflicting blocks on all possible forks with "nothing at stake", since generating a PoS block consumes no more resource than generating a signature. A dedicated digital signature scheme is proposed to enable any node to reveal the identity of the block leader if conflicting blocks at the same height are found. Alternatively, a rule of "three strikes" is proposed in BIB001 to blacklist the stakeholder who is eligible for block creation but fails to properly do so for three consecutive times. In addition, an elected mining leader is also required to sign an auxiliary output to prove that it provides some extra amount tokens as the "deposit". In case that this node is malicious and broadcasts more than one block, any miner among the consecutive block creation leaders can include this output as an evidence in their block to confiscate the attacker's deposit. Such a scheme is specifically designed to disincentivize block forking by the round leader. Grinding attack is another type of attacks targeting PoS BIB004 . With PoS, the committee or the leader is usually determined before a round of mining starts. Then, the attacker has incentive to influence the leader/committee election process in an epoch to improve its chances of being selected in the future. When the verifiable random generator takes as input the header of the most recent block for leader/committee election, the attacker may test several possible block headers with different content to improve the chance of being selected in the future (e.g., BIB004 , BIB002 ). It is expected to use an unbiased, unpredictable random generator to neutralize such a risk BIB004 . In practice, the protocol usually selects an existing block that is a certain number of blocks deep to seed the random function instead of using the current one BIB002 ,  . With all the aforementioned studies, a significant limit of the existing analyses about PoS-based protocols lies in the simplified assumption that ignores the stake trade outside the blockchain network (e.g., at an exchange market)  . A study in BIB003 provides a counterexample for the persistence of PoS in such a situation. The study in BIB003 assumes no liquidity constraint in a blockchain network, where nodes own the same stake at the beginning stage. The author of BIB003 considers a situation where a determined, powerful attacker attempts to destroy the value of the blockchain by repeatedly buying the stake from each of the other nodes at a fixed price. After taking into account the belief of the nodes that the attacker will buy more tokens, the interaction between the attackers and the stakeholders is modeled as a Bayesian repeated game. The study concludes that the success of the attack depends on two factors, namely, the attacker's valuation of the event "destroying the blockchain" and the profit (e.g., monetary interest) that the nodes can obtain from holding the stake. When the former factor is large and the latter is small, the nodes in the network will end up in a competition to sell their stakes to the attackers. As a result, the blockchain can be destroyed at no cost.