Abstract:
The centralization of verification power within pools affects blockchain security. We propose a game-theoretic model to compare the incentives of pools versus individual verifiers in both Proof-of-Work (PoW) and Proof-of-Stake (PoS). Pool centralization affects security by diminishing the security advantage of PoS over PoW and increases majority attack risks in both systems due to lower per-block profits compared to verifiers, yet it enhances resilience by sustaining high attack costs during market downturns. In general, expected post-attack value losses align pool actions with stability. Supported by numerical illustrations, our research underscores how incentives for pools determine blockchain security, offering practical insights.