![]() One such criterion is the so called Proof of Stake (PoS), originally introduced by King and Nadal (2012), also in combination with PoW ( Bentov et al., 2014, 2017) and currently used, or planned to use, by a number cryptocurrrencies ( Halaburda and Sarvary, 2016 Gilad et al., 2017 Buterin and Griffith, 2019 Chen and Micali, 2019 Nguyen et al., 2019 Wang et al., 2019 Nijsse and Litchfield, 2020 Saleh, 2020 Xiao et al., 2020 Rijsberger et al., 2021). Hence, alternatives to PoW were proposed in order to save on electricity consumption. As a result, in recent years a concern increased on this massive electricity consumption, which being exclusively dedicated to solving cryptopuzzles is considered as a waste. Therefore, due to the intense mining competition and computational activity, this type of PoW turned out to be very energy demanding. Moreover, because of block space limitation, users may offer transaction fees to miners as an incentive to prioritize confirmation of their transaction in the next block. As a reward, and cost compensation, for the mining activity the Bitcoin protocol provides a given number of newly mined currency units, so called coinbase. Consequently, the likelihood to solve the puzzle increases with a miner’s computational power, and the Bitcoin protocol is set in such a way that the difficulty to find a solution is adjusted periodically to keep, on average, a block confirmation about every 10 min. There is no strategy to find a solution to such puzzle, which for this reason needs to be solved by computational brute force. To gain such right miners need to exhibit the so-called proof of work (PoW), which requires solving a cryptopuzzle. A distinguishing feature of Bitcoin, as well as of other currencies, is its consensus mechanism and type of incentive provided to the miners, the nodes who have the right and responsibility for confirming currency transactions in the next block of the chain. The publication of the Satoshi Nakamoto paper (2008), introducing Bitcoin, spurred remarkable activity and interest on cryptocurrencies. ![]() As a consequence, a long run uniform distribution of money would seem unlikely unless appropriate measures are introduced. Furthermore, we also discuss how symmetric stationary states of the system could be implausible. In particular, we find that the aggregate demand and supply of currency may not coincide, which implies that users could hold suboptimal quantities of the currency. In a simple framework with risk neutral users we provide some early insights on the monetary equilibrium of Proof of Stake based platforms. In its original version Proof of Stake hinges on the idea that, for a user, the likelihood to confirm the next block is positively related to the amount of currency units held in the wallet, and possibly also on the time length which the money has been unspent for. In recent years blockchain consensus mechanisms based on Proof of Stake gained increasing attention as an alternative to Proof of Work, which requires high energy consumption. Department of Political Economy and Statistics, University of Siena, Siena, Italy.
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