The economic limits of permissionless consensus

Budish, Eric, Lewis-Pye, Andrew and Roughgarden, Tim (2024) The economic limits of permissionless consensus. ACM Transactions on Economics and Computation. 704 - 731. ISSN 2167-8375

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Abstract

An ideal permissionless consensus protocol would, in addition to satisfying standard consistency and liveness guarantees, render consistency violations prohibitively expensive for the attacker without collateral damage to honest participants---for example, by programatically confiscating an attacker's resources without reducing the value of honest participants' resources, as is the intention for slashing in a proof-of-stake protocol. We make this idea precise with our notion of the EAAC (expensive to attack in the absence of collapse) property, and prove the following results: • In the synchronous and dynamically available setting (in which the communication network is reliable but non-malicious players may be periodically inactive), with an adversary that controls at least one-half of the overall resources, no protocol can be EAAC. In particular, this result rules out EAAC for all typical longest-chain protocols (be they proof-of-work or proof-of-stake). • In the partially synchronous and quasi-permissionless setting (in which resource-controlling non-malicious players are always active but the communication network may suffer periods of unreliability), with an adversary that controls at least one-third of the overall resources, no protocol can be EAAC. In particular, slashing in a proof-of-stake protocol cannot achieve its intended purpose if message delays cannot be bounded a priori. • In the synchronous and quasi-permissionless setting, there is a proof-of-stake protocol with slashing that, provided the adversary controls less than two-thirds of the overall stake, satisfies the EAAC property. Our work formalizes the potential security benefits of proof-of-stake sybil-resistance coupled with slashing and the common belief that the merge has increased Ethereum's economic security. Our work also provides mathematical justifications for several key design decisions behind the post-merge Ethereum protocol, ranging from long cooldown periods for unstaking to economic penalties for inactivity.

Item Type:	Article
Official URL:	https://dl.acm.org/journal/teac
Additional Information:	© 2024 The Author(s). Publication rights licensed to ACM.
Divisions:	Mathematics
Subjects:	H Social Sciences > HB Economic Theory Q Science > QA Mathematics > QA75 Electronic computers. Computer science
Date Deposited:	03 Jun 2024 13:21
Last Modified:	28 Jan 2025 17:05
URI:	http://eprints.lse.ac.uk/id/eprint/123726

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