Efficient Novel Privacy Preserving PoS Protocol Proof-of-concept with Algorand

Abstract

Proof of Stake (PoS) emerged to replace and tackle the problem of vast energy consumption in Proof of Work (PoW) consensus. PoS is based on the assumption that the majority of the stake is owned by honest participants. Consequently, instead of solving a computationally hard puzzle to propose the next block in the blockchain, PoS selects a participant with probability proportional to its stake in the network. In contrast to the solution to the puzzle, the proof of selection in PoS has inherent privacy issues. The identity of the selected participant is revealed to other participants to verify the proof, and the stake of the selected can be deducted by frequency analysis. Therefore, Private Proof of Stake (PPoS) emerged to provide a valid alternative to PoW, aiming to tackle the energy consumption in PoW while preserving the privacy of the selected participant in a consensus round. Recent PPoS protocols by Baldimtsi et al. and Ganesh et al., rely on an anonymous broadcast channel and have a large proof size that hinders the practical implementation of the protocols. In this paper, we identify issues and areas of improvement within the current PPoS protocols. We built our privacy-preserving PoS scheme upon the anonymous lottery by Baldimtsi et al. with an instantiation of Algorand as the underlying PoS protocol. We apply fully homomorphic encryption along with zero-knowledge proof techniques to reduce the proof size and to achieve privacy of selected participant’s stake and identity. In comparison with the original anonymous lottery scheme, our scheme achieves better efficiency and complexity.