  As of July 15, 2023, Ethererum, which is a Proof-of-Stake (PoS) blockchain
[1] has around 410 Billion USD in total assets on chain (popularly referred to
as total-value-locked, TVL) but has only 33 Billion USD worth of ETH staked in
securing the underlying consensus of the chain [2]. A preliminary analysis
might suggest that as the amount staked is far less (11x less) than the value
secured, the Ethereum blockchain is insecure and "over-leveraged" in a purely
cryptoeconomic sense. In this work, we investigate how Ethereum, or, more
generally, any PoS blockchain can be made secure despite this apparent
imbalance. Towards that end, we attempt to formalize a model for analyzing the
cryptoeconomic safety of PoS blockchain, which separately analyzes the
cost-of-corruption, the cost incurred by an attacker, and the
profit-from-corruption, the profit gained by an attacker. We derive sharper
bounds on profit-from-corruption, as well as new confirmation rules that
significantly decrease this upper-bound. We evaluate cost-of-corruption and
profit-from-corruption only from the perspective of attacking safety. Finally,
we present a new "insurance" mechanism, STAKESURE, for allocating the slashed
funds in a PoS system, that has several highly desirable properties: solving
common information problem in existing blockchains, creating a mechanism for
provably safe bridging, and providing the first sharp solution for
automatically adjusting how much economic security is sufficient in a PoS
system. Finally, we show that the system satisfies a notion of strong
cryptoeconomic safety, which guarantees that no honest transactor ever loses
money, and creates a closed system of Karma, which not only ensures that the
attacker suffers a loss of funds but also that the harmed parties are
sufficiently compensated.
