Bitcoin-Enhanced Proof-of-Stake Security: Possibilities and Impossibilities

TL;DR

This paper introduces Babylon, a protocol that enhances Proof-of-Stake security by checkpointing onto Bitcoin, addressing inherent security vulnerabilities and enabling faster stake withdrawal with manageable costs.

Contribution

It proposes Babylon, a novel protocol combining PoS with Bitcoin checkpoints to improve security and reduce withdrawal delays, supported by an impossibility proof and experimental validation.

Findings

Babylon reduces stake withdrawal delay from weeks to under 5 hours.

Checkpointing onto Bitcoin incurs less than $10,000 annually.

Security issues in PoS are inherent without external trusted sources.

Abstract

Bitcoin is the most secure blockchain in the world, supported by the immense hash power of its Proof-of-Work miners. Proof-of-Stake chains are energy-efficient, have fast finality but face several security issues: susceptibility to non-slashable long-range safety attacks, low liveness resilience and difficulty to bootstrap from low token valuation. We show that these security issues are inherent in any PoS chain without an external trusted source, and propose a new protocol, Babylon, where an off-the-shelf PoS protocol checkpoints onto Bitcoin to resolve these issues. An impossibility result justifies the optimality of Babylon. A use case of Babylon is to reduce the stake withdrawal delay: our experimental results show that this delay can be reduced from weeks in existing PoS chains to less than 5 hours using Babylon, at a transaction cost of less than 10K USD per annum for posting the checkpoints onto Bitcoin.