Blockchain Proof of Stake can prevent cyberattack as discussed in this article. Proof of Stake refers to the consensus algorithm used in many blockchains which will also be part of Ethereum’s upcoming 2.0 upgrade. PoS is an alternative method of validating transactions and achieving consensus in a blockchain ecosystem that is considered the intellectual successor to Proof of Work.
What is Blockchain Proof of Stake?
While proof-of-stake shares several similarities with its proof-of-work counterpart, a few key differences between the two could have significant implications for blockchain security and future scalability.
In the Bitcoin’s proof of work network, miners race to solve cryptographic puzzles to add confirmed transactions into each block on the blockchain. Nowadays, this process requires substantial computing power and is known to be relatively energy-intensive. In contrast, proof of stake delivers based on the miners’ ownership (stake) in the blockchain.
No block rewards are awarded in PoS, so validators only make money if they validate correctly and vote into the active set. If not, then they lose their deposit. This kind of consensus mechanism is a lot faster and more efficient than proof of work.
In its purest form, there will be no block rewards at all with the proof-of-stake system – meaning the only way to make money would be to validate transactions for a fee. To prevent network spam, the transaction fees would likely need to increase.
How Proof of Stake Can Prevent Cyberattack
Proof of stake is a more efficient alternative because it uses less computing power and enables faster transaction speeds. It also makes the blockchain theoretically more secure against “51% attack” – a form of cyberattack where attackers control over half the network.
Proof-of-work blockchains rely on miners to all act in good faith by following the consensus rules. This means that one group could control over 50% of mining power and execute what’s known as a majority attack.
A majority attack allows the attacker to prevent transaction confirmation, double-spend coins, and perform fork attacks, making forked or alternative versions of the blockchain valid. This is because there has been disagreement over the main version of history in a “51% attack”.
However, a proof-of-stake system only allows the validators to choose a block if they have provided a security deposit. So, attackers would not prevent transactions from being confirmed or fork the blockchain because they wouldn’t have access to their stake.
Proof of stake can also reduce the probability of forks occurring in a blockchain system because it prevents bad actors from double-spending coins. This is because the stake will be lost if this individual acts dishonestly and doesn’t follow consensus.
Proof of Stake can prevent cyberattack mainly because it requires attackers to control the majority of all coins which makes the attack costly with minimal rewards and almost impossible.
How Proof of Stake Works
Distributed computing systems, such as blockchains, are designed to be secure and offer the highest Byzantine fault tolerance which ensures the system operates correctly; even if some components fail, behave maliciously, or respond slowly.
Proof-of-work mining was used first in Bitcoin by Satoshi Nakamoto in 2008 to produce the blockchain. It is used to verify transactions through a consensus algorithm, called “proof of work,” where miners solve a cryptographic puzzle by completing an impossible value puzzle that uses trial-and-error.
This process requires expensive hardware and consumes large amounts of energy. As a miner, if you solve the puzzle first, you will be awarded the block and the transaction fees within.
Since then, variations of proof-of-work have appeared in many other cryptocurrencies, such as Litecoin. Proof-of-stake is an alternative to PoW that has emerged as a consensus algorithm for blockchain systems.
PoS could present new challenges or opportunities for organizations looking to adopt blockchain technology into their businesses.
The idea is that instead of spending resources on performing the complex calculations required for proof-of-work, a node (a computer connected to the blockchain network) stakes several coins and becomes eligible to validate transactions. In this scenario, one would need to purchase at least 51% of all the coins to attack the blockchain which would make it significantly harder to gain control over the blockchain ledger.
Proof-of-stake is primarily used by cryptocurrencies that want to encourage ownership (stake) of their currency and prevent the need for huge hardware investments required with PoW.
Proof of stake promises to bring consensus into the blockchain by allowing all stakeholders in the system to participate in the validation process. With this algorithm, there is no need for competition. Instead, there is a power distribution between all validators voted into the active set through their total coin balance and length of time staking.
Other Blockchain Protocols include:
1- Proof of Authority: Instead of relying on the entire network to validate transactions, PoA uses an authorized dealer that validates all transactions.
2- Proof of Capacity: Instead of using energy-intensive computations, PoC uses hard disk space; participants are required to store a certain amount to gain mining rights in the blockchain.
3- Proof of Burn: In this blockchain protocol, miners give up their currency by sending it to a verifiably unspendable address; thus, they can only get the currency back by mining a new block.
4- Proof of Elapsed Time: This is a particular case of a proof-of-stake algorithm that uses trusted execution environments to add blocks. Participants in the blockchain must wait a specific amount of time while being recorded by a trusted validator before they are allowed to produce a block.
5- Proof of Weight: This protocol allows participants with higher weight in the network to create blocks more frequently than lighter participants.
6- Delegated Byzantine Fault Tolerance (dBFT): This protocol allows all users who stake tokens to participate in the consensus process by utilizing token holder voting.
7- Tendermint: This protocol is similar to Delegated Byzantine Fault Tolerance but uses a combination of stakeholders’ voting and traditional proof-of-work mining to achieve consensus.
So far, most blockchain protocols have been built using the rules of the Nakamoto Consensus, which states that all nodes in the system must agree to a certain set of rules. In Proof of Stake, instead of using complex computations to verify transactions, participants must have a certain number of tokens to validate a block.
What Blockchain Projects Already Use Proof of Stake?
A handful of cryptocurrencies currently use a version of proof-of-stake, and Ethereum is planning to convert from proof of work to proof stake in ETH 2.0 which is slated for conversion in late 2021 or early 2022. Other examples are Peercoin, Nav Coin, Qora, and Nxt.
Many other cryptocurrencies have expressed interest in moving towards the proof of stake consensus model because it is better for scalability and security than Proof of Work. However, there are many technical obstacles that need to be resolved before pure proof-of-stake can be implemented.
Proof of Work vs. Proof of Stake
How do Proof of Work and Proof of Stake compare? Proof of Stake is an alternative form of consensus that has recently gained popularity. Proof-of-Stake holds the same goal as proof-of-work, to reach a fair and decentralized agreement on the blockchain, but uses an entirely different method to achieve it.
Rather than relying on computational power like with proof-of-work, proof-of-stake uses the amount of currency/tokens held by the miner to determine their chance of finding or mining a new block.
Proof-of-Stake works in some ways similar to how miners in PoW are required to solve cryptographic puzzles to find blocks, but it also has very different characteristics that complement proof-of-work.
Some of the benefits to using proof-of-stake are:
-It is less power consuming since miners are not required to use their computational power in the mining process.
-To mine, there is no need for special equipment. All that is needed to become a validator is an active internet connection and the currency required to be considered an active participant.
-It is much simpler since it does not require advanced cryptographic puzzles that must be solved to find a new block.
Benefits of Blockchain Proof of Stake in Preventing Cyberattacks
1- The cost of hacking a blockchain is higher than the potential benefits that can be reaped from such an attack.
2- To successfully carry out a 51% attack, cybercriminals must control power equivalent to at least 51% of global hashing power.
3- If they succeed in carrying out the attack, the cost of the investment becomes a significant deterrent for them to keep going with their malicious activity.
4- To be recognized as a legitimate blockchain, attackers must convince more than 50% of all participants in the network that theirs is the correct chain while simultaneously making sure they don’t get outcompeted by the “good” chain.
5- The higher the hashing power and the number of participants, the more difficult it becomes to launch a successful cyberattack.
Drawbacks of Proof of Stake
Cyberattacks against proof of work cryptocurrencies such as Bitcoin and Ethereum (PoW) aren’t new. The evidence of PoS protocol is also not without its flaws when it comes to security. One of the greatest drawbacks is that it’s not very efficient in ensuring safety as the computers must run 24/7 on the network to maintain ultimate computing power for cyberattack prevention. That’s impossible.
Some drawbacks in using proof-of-stake include:
· If someone holds 1/3rd or more of the tokens, they are given more power since they are more likely to be selected to mine.
· This can be seen as unfair because it concentrates on power among a small group of people.
· It is more centralized since only 10–20 validators participate in mining new blocks; this allows for manipulation and collaboration on the network, making it unreliable.
· Nodes have been hacked many times, undermining the trust invested in cryptocurrencies based on this consensus algorithm. The blockchain itself has never been hacked, but individual nodes have been attacked.
However, hackers have managed to find several bugs that could be exploited to create coins out of nowhere, hijack the blockchain, and recover coins that had already been spent.
Proof of Stake is a somewhat controversial topic since many people don’t understand how it works. However, it is easily understandable that proof-of-stake is more secure and less resource-intensive than proof-of-work, but some drawbacks still need further attention. Although a PoS blockchain has never been hacked, individual nodes have been attacked.