Proof of Honesty: Blockchain consensus with 99% Byzantine Fault Tolerance

Proof of Stake (PoS) offers only 33% BFT in the sense that if a larger percentage of the validating network fails to follow protocol, there is no guarantee of honest blockchain validation. We show the PoS mechanism generates a coordination game. Thus, if nodes make self-interested choices over whether to follow protocol (honesty or dishonesty), anything can be supported as a Nash equilibrium. Nodes benefit from coordinating on dishonest validation, but honest validation, and failing to commit both honest and dishonest blocks, are also equilibria. This result persists regardless of how much nodes stake, or how diverse that staking pool might be. We define a simplified version of the Proof of Honesty (PoH) blockchain protocol. PoH leverages the fact that blockchains are deterministic, and so users are able to distinguished correct from incorrect chain states without the need for consensus. A single node presenting a correct chain view is therefore sufficient, since users can ignore false forks and continue to trade tokens of a fork they know is correct. As a result, Proof of Honesty is (N ? 1)/N BFT (which we style “99% BFT”). We also show that PoH implements honest blockchain validation in Nash equilibrium with relatively modest stakes.