CFA Level I · CFA Level I Exam · Introduction to Digital Assets
A permissionless blockchain uses proof of stake. A validator is selected to add a block in proportion to the tokens it has locked up, and it can lose part of that stake if it validates fraudulent transactions. This penalty mechanism is most likely intended to:
The forfeiture of staked tokens for fraudulent validation is meant to align validators' economic incentives with honest behavior, because cheating becomes costly. It does not raise energy use, since proof of stake uses less energy than proof of work, nor does it restrict who can read the ledger.
- Aalign validators' economic incentives with honest behaviorCorrect
- Bincrease the energy consumed by the network
- Creduce the number of participants who can read the ledger
Explanation
Slashing a stake makes dishonesty costly, so validators gain by acting honestly. Proof of stake generally uses less energy than proof of work, and a permissionless ledger is readable by all, so the other options are wrong.
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