The NeuCoin Project just released a 40-page technical white paper on proof-of-stake. It is available as a PDF version on this link: http://www.neucoin.org/en/whitepaper

We hope to gather comments and questions from the PoS community as we consider this to be a first draft. Our work attempts to highlight how PoS is a superior alternative to Proof-of-Work. It offers arguments and data to stand up against the unsubstantiated “nothing at stake” claims made by many in the PoW camp. Bounties will be awarded for all constructive feedback, positive or negative; see details below.

The white paper starts with a discussion of PoW’s severe flaws: its increasing centralization, the prospect of much higher transaction fees over time, and the diverging interests of corporate miners and Bitcoin holders. It then explains how PoS solves all these flaws. Then it moves on to answering objections and addressing attack vectors.

Answering the “nothing at stake” argument

Thus far, PoS has been dismissed by much of the crypto community - especially large holders of Bitcoin - based on the umbrella objection that there is “nothing at stake.” What is meant is that since PoS mining does not consume any outside resources (electricity, computing power), miners have no costs, so nothing prevents them from endlessly trying to commit double-spends, or mining on multiple branches, no matter how low the odds of success. The critics ask, “how can you have security without paying anything for it?”

What PoW advocates neglect to see is that PoS security does have a cost: the capital cost of acquiring and holding coins. The brilliance of PoS is that it turns all coin owners into security providers, and requires any would-be attacker to purchase a large amount of the currency to attempt an attack, which would be an attack on his own wealth.

Besides ignoring the reality of capital costs, PoS critics are also prone to depicting scary-sounding attack vectors against PoS - grinding through the blockspace, rewriting history with old private keys, long-range, pre-programmed double spends - without explaining the details of how these attacks would be conducted or demonstrating mathematically that they have any chance of success.

Perhaps by leaving the critiques abstract, the point is made that PoS’s “nothing at stake” flaw is fundamental and nothing can be done to fix it. Or it could be that actually taking the time and effort to analyze the actual odds of success of a given attack vector against PoS is hard, time consuming and may not lead to the desired result (that PoS is hopelessly doomed). NeuCoin has taken the time to analyze the attack vectors and their chances of success. We hope that our white paper will be a contribution to the entire PoS community, and invite you to comment, give feedback and help take this technology even further.

White paper bounty program

NeuCoin bounties will be awarded by the NeuCoin Code foundation for all constructive input, both positive and critical, you will find details here: http://forum.neucoin.org/t/white-paper-bounty-program/

PoW is centralized, costly and inefficient - and has been attacking PoS on flimsy grounds. We hope the wider PoS community will join us in this debate.