Can We Afford Integrity by Proof-of-Work? Scenarios Inspired by the Bitcoin Currency

Proof-of-Work (PoW), a well-known principle to ration resource access in client-server relations, is about to experience a renaissance as a mechanism to protect the integrity of a global state in distributed transaction systems under decentralized control. Most prominently, the Bitcoin cryptographic currency protocol leverages PoW to 1) prevent double spending and 2) establish scarcity, two essential properties of any electronic currency. This paper asks the important question whether this approach is generally viable. Citing actual data, it provides a first cut of an answer by estimating the resource requirements, in terms of operating cost and ecological footprint, of a suitably dimensioned PoW infrastructure and comparing them to three attack scenarios. The analysis is inspired by Bitcoin, but generalizes to potential successors, which fix Bitcoin’s technical and economic teething troubles discussed in the literature.