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Proof of Work and Proof of Stake consensus protocols: a blockchain application for local complementary currencies

Author

Listed:
  • Dominique Torre

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

  • Sothearath Seang

    (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

This paper examines, with the help of a theoretical setting, the properties of two blockchain consensus protocols, namely the Proof of Work (PoW) and the Proof of Stake (PoS) protocol in the management of a digital local complementary currency or a network of digital local currencies. The model includes a control (by the issuer of the currency) of advantages derived from the use of a local currency by heterogeneous consumers and a determination of rewards for heterogeneous validators and miners. It also considers the resilience of these protocols to attacks conducted by an individual or a pool of validators or miners. Our results share similarities with an ordinary crypto-currency system and show that there is support for the PoS protocol for small communities of local complementary currencies, whereas the PoW appears to be more advantageous when the size of the communities is significantly large. JEL Classification: E42, D91, L86, O31

Suggested Citation

  • Dominique Torre & Sothearath Seang, 2019. "Proof of Work and Proof of Stake consensus protocols: a blockchain application for local complementary currencies," Working Papers halshs-02268391, HAL.
    • Handle: RePEc:hal:wpaper:halshs-02268391
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    Cited by:

    1. Richard Baron & Magali Chaudey, 2019. "Blockchain and Smart-contract: a pioneering Approach of inter-firms Relationships? The case of franchise networks," Working Papers 1917, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.

    More about this item

    Keywords

    consensus protocol; local currency; heterogeneous agents; payment systems; Proof of Work; blockchain; Proof of Stake;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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