Account Management and Stake Pools in Proof of Stake Ledgers

Blockchain protocols based on the Proof of Stake (PoS) paradigm are —by nature— dependent on the active participation of the owners of the assets maintained in the ledger. This suggests a duality of the asset management functionality, which typifies PoS ledgers: assets may be transferred between entities, whereas they are also involved in the PoS protocol’s execution. As a result, PoS account management schemes are required to offer both functionalities, a feature that has not been thoroughly investigated in the existing literature so far. Moreover, it is often the case that not all stakeholders consistently take part in the protocol’s execution and engage in the PoS mechanism. Given the security risks that such behavior introduces, a countermeasure is to allow stake representation, thus giving the stakeholders the option to delegate their “staking” rights to other participants, thus forming “stake pools.” The core idea is that stake pool leaders are online and perform the required actions, whilst the stakeholders retain the ownership of their assets. Although this is a seemingly simple solution, the inner workings of such mechanism have yet to be fully investigated. Our work fills these gaps by thoroughly presenting all desiderata for account management and stake pools in the PoS setting. We formalize the requirements and present a framework which can be used to build stake pools for any PoS protocol. We introduce the first ideal functionality for a PoS wallet’s core, which captures the capabilities that a PoS wallet should possess, and show how it can be realised based on standard cryptographic primitives. In describing the construction of PoS addresses, we distill and explore a novel property that PoS addresses should possess: non-malleability. We also specify the actions that a generic PoS wallet should offer, such as payment and staking, as well as formalize the security of the ``stake-pooled’’ variant of any PoS protocol.