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TontineCoin: Survivor-based Proof-of-Stake

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Abstract

Proof-of-Stake cryptocurrencies avoid many of the computational and environmental costs associated with Proof-of-Work protocols. However, they must address the nothing-at-stake problem, where a validator might attempt to sign off on competing blocks, with the hopes of earning coins regardless of which block becomes accepted as part of the blockchain. Cryptocurrencies such as Tendermint resolve this challenge by requiring validators to bond coins, which can be seized from a validator that is caught signing two competing blocks. Nevertheless, as the number of validators increases, it becomes increasingly infeasible to effectively monitor all validators, and to reach consensus. In this work, we incentivize proper block monitoring by allowing validators to form tontines. In the real world, tontines are financial agreements where payouts to each member increase as the number of members decreases. In our system, a tontine is a group of validators that monitor each other’s behavior, “murdering” any cheating tontine members to seize their stake. As the number of validators in a tontine is smaller than the number of validators in the currency as a whole, members can effectively police each other. We propose two methods whereby a Tendermint-like currency can be extended to allow for the creation of tontines: a pure PoS model, and a hybrid Proof-of-Stake/Proof-of-Work model. We describe snitch mechanisms for both the inter- and intra-tontine setting, argue our incentive mechanisms increase monitoring, and describe how it handles a variety of possible attacks. We extend our model to act as a validator delegated cryptocurrency, with the users having an incentive to partially participate. We show that these strategies may benefit validators as well as speed up the block formation process. Moreover, we describe a prototype implementation of TontineCoin, and perform various experiments that support our theoretical analysis

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Notes

  1. https://cosmos.network

  2. For the starting block, known as the genesis block, the previous block hash field has a special value.

  3. A validator in a Proof-of-Stake system is roughly analogous to a miner in a Proof-of-Work system.

  4. We provide JavaScript implementations of this pseudocode and the pseudocode examples in the remainder of this paper for use with the SpartanGold framework. The implementation is available at https://github.com/taustin/tendermint-sg. The function names used in our pseudocode and in our JavaScript code are identical. Review of this implementation may facilitate better understanding of Tendermint’s design.

  5. When comparing two Proof-of-Work values, we often describe it in terms of leading zeroes – the better proof produces more leading zeroes when the block is hashed. However, we actually compare the two hash values simply as numerical values, making the odds of a tie astronomically unlikely.

  6. Our discussion assumes that only a single tontine is created in any given round. However, it is trivial to modify the protocol to accept the top X bids.

  7. Should there be no other active tontines, the remaining tontine may continue to operate indefinitely.

  8. The block producer might also have an incentive to steal the snitch’s evidence transaction even if they are in the same tontine. If the block producer has accounts in multiple tontines, the block producer might gain a larger share of the seized tokens in a different tontine, in which case the block producer has an incentive to steal the evidence transaction and deny the snitch their reward.

  9. We have abstracted away from the fact that as the effort put into monitoring increases, there is a two fold impact: 1) for a given level of cheating, cheaters are more likely to be caught, but 2) increased monitoring will likely lead to less cheating given the increased likelihood of being caught.

  10. If we allow for the “murder” of cheaters under Tendermint, the cost per cheater is almost three times as expensive as checking occurs until there is only one validator left.

  11. https://medium.com/@staked/slashing-risks-and-validator-diligence-f6901cc9622a

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Acknowledgements

We would like to thank Jae Kwon of Tendermint/Cosmos for his valuable feedback and insight, as well as the anonymous reviewers.

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Authors and Affiliations

  1. Computer Science Department, San Jose State University, San Jose, California, USA

    Chris Pollett, Thomas H. Austin, Katerina Potika & Prashant Pardeshi

  2. Economics Department, San Jose State University, San Jose, California, USA

    Justin Rietz

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  1. Chris Pollett
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Correspondence to Katerina Potika.

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This article is part of the Topical Collection: Special Issue on Blockchain for Peer-to-Peer Computing

Guest Editors: Keping Yu, Chunming Rong, Yang Cao, and Wenjuan Li

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Pollett, C., Austin, T.H., Potika, K. et al. TontineCoin: Survivor-based Proof-of-Stake. Peer-to-Peer Netw. Appl. 15, 988–1007 (2022). https://doi.org/10.1007/s12083-021-01227-x

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