Blockchain Without Waste: Proof-of-Stake

Review of Financial Studies, Volume 34, March 2021, Pages 1156-1190

49 Pages Posted: 7 Jun 2018 Last revised: 4 Nov 2021

Date Written: July 7, 2020


Permissionless blockchains require a protocol to generate consensus. Many prominent permissionless blockchains employ Proof-of-Work (PoW) for that purpose, but PoW possesses significant shortcomings. Various alternatives have been proposed. This paper provides the first formal economic model of the most famous alternative, Proof-of-Stake (PoS), and establishes conditions under which PoS generates consensus. A sufficiently modest reward schedule not only implies the existence of an equilibrium in which consensus obtains as soon as possible but also precludes a persistent forking equilibrium. The latter result arises because PoS, unlike PoW, requires that validators are also stakeholders.

Keywords: Blockchain, Consensus, Proof-of-Stake, FinTech

JEL Classification: C70, G00

Suggested Citation

Saleh, Fahad, Blockchain Without Waste: Proof-of-Stake (July 7, 2020). Review of Financial Studies, Volume 34, March 2021, Pages 1156-1190, Available at SSRN: or

Fahad Saleh (Contact Author)

University of Florida ( email )

Warrington College of Business
Gainesville, FL 32611
United States


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