A Brief History of Proof-of-Stake

Felix Lutsch
Aug 9 · 5 min read

Human economic relationships have been based on the same basic principles for thousands of years.

Surety bond tablet disvocered in Nippur, Iraq (dated to 2400 B.C.)

An over 4,000 year-old tablet discovered in Mesopotamia, present-day Iraq, depicts an arrangement about the payment of corn, the currency of that era. This is the first recorded history of what we call a surety bond today.

Portrayed on the tablet are three parties: the first party is the obligee, who is expecting a payment of corn at some later point in time. The second party is the principal, who is supposed to fulfill this obligation. The obligee requires a guarantee from a third party, the surety, should the principal fail to meet their obligation. This guarantee is called a surety bond. Surety bonds are commonly requested to ensure contractual promises are met. They are usually obtained in exchange for annual premiums to account for the risk of the principal failing to meet their obligations.

But what does all of this have to do with Proof-of-Stake (PoS)?

In some sense, stake in a PoS network is a type of surety bond:

By staking tokens with a validator, a token holder is providing a surety bond to the protocol that this validator will meet his obligation to stay online and to faithfully validate transactions. The token holder provides this surety bond in expectation of future premiums; the staking rewards. In PoS networks with slashings, the protocol can claim a part of the surety bond should the principal (the validator) fail to meet his obligations, e.g. by going offline or double-signing. The difference between common forms of a surety bond and a PoS protocol is that premiums aren’t paid by the principal, but by the obligee (the protocol) itself.

Let’s fast forward a few thousand years and find out how these fundamental economic principles made it into the world of distributed systems and digital assets.

2012 — The Inception of Proof-of-Stake

2013 — The Early Days

2014 — BFT, Slashing, and DPoS

2015 & 2016 — The Quiet Before the Storm

2017 — Peak Hype

2018 — A New Ecosystem Emerges

Pro tip: from here on developments in PoS can be followed along in the Staking Economy newsletter ;)

2019+ Proof-of-Stake Goes Mainstream?

I hope this article helped you to understand the key milestones in the history of Proof-of-Stake!

Even though there is already a rich history of work around Proof-of-Stake, we are still at the very beginning. The pace of innovation is rapidly accelerating and many interesting experiments are and will be conducted. Some examples include: Polkadot’s Nominated Proof-of-Stake algorithm, anti-correlation penalties, exchange staking, as well as designs that will allow staking positions to unlock their full economic potential (e.g. delegation vouchers).

The next few months and years will show which PoS design will help enable a secure, decentralized, and performant blockchain network.

We will see the staking and decentralized finance space merging and hopefully will be able to avoid some of the outcomes that made so many fall out of love with the legacy financial ecosystem. I remain hopeful that the crypto community can solve this puzzle and create more sustainable systems for human collaboration.

Follow Chorus One on Twitter and give our podcast a listen (there’s an episode dedicated to this article)!

Originally published at https://blog.chorus.one on August 9, 2019.

Chorus One

Chorus One is building and operating validators on Proof-of-Stake networks.

Felix Lutsch

Written by

Research Analyst @ChorusOne. Editor @StakingEconomy. @FelixLts.

Chorus One

Chorus One is building and operating validators on Proof-of-Stake networks.

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