Stakechain: A Bitcoin-Backed Proof-of-Stake

Abstract

We propose an energy-efficient solution to the double-spending problem using a bitcoin-backed proof-of-stake. Stakers vote on sidechain blocks forming a record that cannot be changed without destroying their collateral. Every user can become a staker by locking Bitcoins in the bitcoin blockchain. One-time signatures guarantee that stakers lose their bitcoin stake for publishing conflicting histories. As long as 34% of the stakers are honest the sidechain provides safety, and with a 67%-majority it provides liveness. Overwriting a finalized block costs at least 34% of the total stake. Checkpoints in Bitcoin’s blockchain mitigate classical attacks against conventional proof-of-stake algorithms. A stakechain’s footprint within the mainchain is minimal. The protocol is a generic consensus mechanism allowing for arbitrary sidechain architectures. Spawning multiple, independent instances scales horizontally to a free market of sidechains which can potentially serve billions of users.