Bitcoin-Enhanced Proof-of-Stake Security: Possibilities and Impossibilities

Bitcoin is the most secure blockchain in the world, supported by the immense hash power of its Proof-of-Work miners. Proof-of-Stake chains are energy-efficient, have fast finality and some accountability, but face several security issues: susceptibility to non-slashable long-range safety attacks, non-accountable transaction censorship and stalling attacks and difficulty to bootstrap PoS chains from low token valuation. We show these security issues are inherent in any PoS chain without an external trusted source, and propose a new protocol Babylon, where an off-the-shelf PoS protocol uses Bitcoin as an external source of trust to resolve these issues. An impossibility result justifies the optimality of Babylon. Our results shed light on the general question of how much security a PoS chain can derive from an external trusted chain by only making succinct commitments to the trusted chain.