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: a certified computation need not be anyone's demanded job. We separate three properties of a work receipt — work soundness ($\mathsf{W}$), job binding ($\mathsf{B}$), and demand exogeneity ($\mathsf{E}$) — and locate the gap at $\mathsf{E}$. Two results are unconditional. First, payments between coalition-controlled requesters and workers are recoverable transfers that contribute no Sybil-resistant cost, so no security lower bound may count them (Lemma 1). Second, under free pseudonyms and endogenous observation a coalition can simulate the receipts of economically independent requesters, so endogenous receipts cannot certify $\mathsf{E}$ (Theorem 1); we lower-bound the cost of evading a stated class of provenance estimators. Building on these, a robustness bound: because a permissionless mechanism must remain live on the zero-demand path, its leader-election floor cannot depend on the demand component of service receipts (Theorem 2), and any admissible receipt boost is quantitatively capped. Fork-independent salvage value of useful outputs can leave security neutral, negative, or positive depending on salvage asymmetry and demand, which we characterize in a stylized free-entry model. Constructively, an irrecoverable tax on every settled payment makes the burn — not proof of independence — the security resource. Deployed evidence comprises one reported audit (Pearl cuPOW) and a reward-program farming analogue; the election-side failure is, at present, a model prediction. Useful-computation receipts are appropriate instruments for payment, collateral, and loss allocation — and a bounded, priced election boost — but not the leader-election floor.