Virtual ASICs: Generalized Proof-of-Stake Mining in Cryptocurrencies

In proof-of-work based cryptocurrencies, miners invest computing power to maintain a distributed ledger. The drawback of such a consensus protocol is its immense energy consumption. Bitcoin, for example consumes as much energy as a small nation state. To prevent this waste of energy various consensus mechanism such as proof-of-space or proof-of-stake have been proposed. In proof-of-stake, block creators are selected based on the amounts of money they stake instead of their expanded computing power. In this work we study Virtual ASICs–a generalization of proof-of-stake. Virtual ASICs are essentially a virtualized version of proof-of-work. Miners can buy on-chain virtual mining machines which can be powered by virtual electricity. Similar to their physical counterparts, each powered virtual ASIC has a certain chance to win the right to create the next block. In the boundary case where virtual electricity is free, the protocol corresponds to proof-of-stake using an ASIC token which is separate from the currency itself (the amount of stake equals your virtual computing power). In the other boundary case where virtual computers are free, we get a proof-of-burn equivalent. That is, a consensus mechanism in which miners ‘burn’ money to obtain lottery tickets for the right to create the next block. We provide the cryptographic machinery required to base a consensus protocol on Virtual ASICs, as well as to sell them in sealed-bid auctions on-chain. We ensure that as long as a majority of the miners in the system mine honestly, bids remain both private and binding, and that miners cannot censor the bids of their competitors. To achieve this, we introduce a novel all-or-nothing broadcast functionality in blockchains that is of independent interest.