Tuning PoW with Hybrid Expenditure Itay Tsabary Alexander Spiegleman Ittay Eyal
[email protected] [email protected] [email protected] Technion, IC3 Faceook Novi Technion, IC3 Haifa, Israel Menlo Park, California, USA Haifa, Israel ABSTRACT 104, 105] that facilitate monetary ecosystems of internally-minted Proof of Work (PoW ) is a Sybil-deterrence security mechanism. It tokens, maintained by principals called miners. Miners that follow introduces an external cost to a system by requiring computational the protocol are rewarded with tokens; tokens are scarce, hence a effort to perform actions. However, since its inception, a central market forms [26, 27, 47, 111]; so, miners can sell their obtained challenge was to tune this cost. Initial designs for deterring spam tokens for fiat currency (e.g., USD, EUR), compensating them for email and DoS attacks applied overhead equally to honest partici- their PoW expenses. pants and attackers. Requiring too little effort did not deter attacks, To guarantee their security [50, 71, 128], PoW cryptocurrencies whereas too much encumbered honest participation. This might be moderate their operation rate by dynamically tuning the required the reason it was never widely adopted. computation difficulty to match miner capabilities [98, 119, 122, Nakamoto overcame this trade-off in Bitcoin by distinguishing 125]. Consequently, the PoW expenditure directly depends on to- desired from malicious behavior and introducing internal rewards ken values [15, 40, 103, 117] – higher token prices imply higher for the former. This solution gained popularity in securing cryp- mining rewards, which draw more miners to participate, leading tocurrencies and using the virtual internally-minted tokens for re- to more expended resources.