Paper 2020/525

Account Management in Proof of Stake Ledgers

Dimitris Karakostas, Aggelos Kiayias, and Mario Larangeira

Abstract

Blockchain protocols based on Proof-of-Stake (PoS) depend — by nature — on the active participation of stakeholders. If users are offline and abstain from the PoS consensus mechanism, the system’s security is at risk, so it is imperative to explore ways to both maximize the level of participation and minimize the effects of non-participation. One such option is stake representation, such that users can delegate their participation rights and, in the process, form "stake pools". The core idea is that stake pool operators always participate on behalf of regular users, while the users retain the ownership of their assets. Our work provides a formal PoS wallet construction that enables delegation and stake pool formation. While investigating the construction of addresses in this setting, we distil and explore address malleability, a security property that captures the ability of an attacker to manipulate the delegation information associated with an address. Our analysis consists of identifying multiple levels of malleability, which are taken into account in our paper’s core result. We then introduce the first ideal functionality of a PoS wallet’s core which captures the PoS wallet’s capabilities and is realized as a secure protocol based on standard cryptographic primitives. Finally, we cover how to use the wallet core in conjunction with a PoS ledger, as well as investigate how delegation and stake pools affect a PoS system’s security.