Paper 2026/1492

Proof of Demand Is Not Proof of Work: On the Limits of Demand-Weighted Consensus under Free Pseudonyms

Abstract

Proof-of-useful-work (PoUW) certifies computational hardness, not utility. We separate three properties of a work receipt: work soundness ($\mathsf{W}$), job binding ($\mathsf{B}$), and demand exogeneity ($\mathsf{E}$), the last defined relative to an attacking coalition. Job binding is cryptographically achievable; demand exogeneity is not derivable from endogenous receipts. Payments between coalition-controlled requesters and workers are recoverable transfers, so no attack-cost lower bound may count their nominal value (Lemma 1). Under free pseudonyms and endogenous observation, receipts cannot certify $\mathsf{E}$ (Theorem 1); against a stated class of provenance estimators, evasion costs the equivalent of an implicit tax on simulated volume, below one percent at the parameters we consider. A mechanism that must stay safe and live on the zero-demand path needs an election path independent of demand-derived receipt weight (Proposition 4). The quantitative consequence is a sizing rule. A receipt boost that a coalition can realize by paying itself must be capped against the demand-independent floor (Corollary 4), and pricing the boost with a burn changes its cost but not this cap (Corollary 5): a burn-priced boost capped at $\kappa$ times a participant's own stake lowers the floor share an attacker needs from $\tau$ to $\tau/(1+\kappa(1-\tau))$ once honest demand vanishes. In a stylized free-entry model, fork-independent salvage value of useful outputs leaves security neutral, lower, or higher depending on salvage asymmetry and demand. An irrecoverable tax on every settled payment makes the burn the security resource. We know of no production chain that weights leader election by endogenously attested demand, so the results constrain a design space; the deployed systems closest to it, Filecoin and Gridcoin, keep a demand-independent floor. Receipts suit payment, collateral, loss allocation, and a bounded, priced election boost. They cannot carry the leader-election floor.