Enhanced Schema for Proof of Stake Mechanism Based on Stake Size and Random Validator Selection

Abstract

The Proof of Work consensus algorithm is currently used by many cryptocurrencies like Bitcoin. In Proof of Work, nodes compete with each other to solve a cryptographic puzzle. The node that solves the puzzle fastest is selected as the miner to mine the new block. Proof of Work favors nodes with high computation power. Higher the computation power more the probability that the node will be selected as the miner. Thus Proof of Work is energy intensive. To increase their computation power miners come together to form a mining pool that makes the blockchain network centralized. Due to these pitfalls, Proof of Stake was used as a substitute for Proof of Work. Proof of Stake takes into consideration the amount of staked coins and other factors like coin age to select a validator or miner. Thus Proof of Stake saves energy and prevents the generation of mining pools. But Proof of Stake favors the rich nodes. Higher the stake more the probability of becoming the validator. Since rich nodes are favored, the network becomes centralized over time. To overcome this problem the validator selection process must be randomized, but the size of the stake should also be considered. This paper proposes two enhanced versions of the Proof of Stake algorithm that randomizes the validator selection process and also considers the size of the stake.