PoS Economics: A Complex Web of Validators, Protocols, and Blockchain Systems

Proof-of-Stake (PoS) economics is a complex and nuanced topic in the world of blockchain and cryptocurrency. At its core, PoS secures a blockchain by requiring validators to commit stake and follow consensus rules. Validators receive issuance and fees for participation, but can also lose rewards for downtime and be slashed for provable violations.

One key issue with PoS economics is that two providers may offer seemingly similar services while delivering very different results for customers. For example, one provider may deliver issuance yield, another fee and MEV (Maximum Extractable Value) revenue, and a third real staking return. This highlights the importance of carefully examining the underlying economics of any PoS platform.

A crucial aspect of PoS economics is understanding how validators interact with each other and with the blockchain protocol itself. The Proof-of-Stake Economics Chain diagram outlines five key states: commit stake, propose and attest, earn protocol rewards, apply penalties, and withdraw or reallocate. Each state represents a critical juncture in the staking process, where the staked capital, consensus service, reward stream, and penalty or extraction channel change.

The article also explores the importance of tracking records in PoS economics, particularly for validator operators and delegators/stakers. These parties must agree on the same event without being copies of one vendor database, highlighting the need for a resilient design that names the fallback record and authorizes personnel to resolve any discrepancies.