Proof-of-Stake Sidechains

Sidechains have long been heralded as the key enabler of blockchain scalability and interoperability. However, no modeling of the concept or a provably secure construction has so far been attempted.

We provide the first formal definition of what a sidechain system is and how assets can be moved between sidechains securely. We put forth a security definition that augments the known transaction ledger properties of persistence and liveness to hold across multiple ledgers and enhance them with a new “firewall” security property which safeguards each blockchain from its sidechains, limiting the impact of an otherwise catastrophic sidechain failure.

We then provide a sidechain construction that is suitable for proof-of-stake (PoS) sidechain systems. As an exemplary concrete instantiation we present our construction for an epoch-based PoS system consistent with Ouroboros (Crypto 2017), the PoS blockchain protocol used in Cardano which is one of the largest pure PoS systems by market capitalisation, and we also comment how the construction can be adapted for other protocols such as Ouroboros Praos (Eurocrypt 2018), Ouroboros Genesis (CCS 2018), Snow White and Algorand. An important feature of our construction is merged-staking that prevents “goldfinger” attacks against a sidechain that is only carrying a small amount of stake. An important technique for pegging chains that we use in our construction is cross-chain certification which is facilitated by a novel cryptographic primitive we introduce called ad-hoc threshold multisignatures (ATMS) which may be of independent interest. We show how ATMS can be securely instantiated by regular and aggregate digital signatures as well as succinct arguments of knowledge such as STARKs and bulletproofs with varying degrees of storage efficiency.