POSDAO: Proof of Stake Decentralized Autonomous Organization

Abstract

In this paper we introduce POSDAO, a Proof of Stake (POS) algorithm implemented as a
decentralized autonomous organization (DAO). It is designed to provide a decentralized, fair,
and energy efficient consensus for public chains. The algorithm works as a set of smart
contracts written in Solidity. POSDAO is implemented with a general purpose BFT consensus
protocol such as Authority Round (AuRa) with a proposer node and probabilistic finality, or
Honey Badger BFT (HBBFT), leaderless and with instant finality. Validators are incentivized to
behave in the best interests of a network through a configurable reward structure. The algorithm
provides a Sybil control mechanism for managing a set of validators, distributing rewards, and
reporting and penalizing malicious validators. The authors provide a reference POSDAO
implementation, xDai POSDAO, which uses xDai as a stable transactional coin and a
representative ERC677 token (STAKE) as a staking token. The reference implementation
functions on an Ethereum 1.0 sidechain and utilizes the AuRa consensus protocol. Assets are
bridged between the Ethereum mainnet and the xDai POSDAO network using several instances
of the POA TokenBridge.

Keywords: Proof of Stake, Ethereum, HoneyBadger BFT, Delegated Proof of Stake