This is an attempt to address the objections to proof-of-stake made here: http://bitcoinmagazine.com/10829/impossible-trinity-security-environment-protection-decentralization/
. This attempt applies the following two restrictions to the proof-of-stake model implemented by Peercoin:
1. Money created by block chaining is only useful in paying transaction fees.
2. Only money created by block chaining is useful in paying transaction fees.
Here is a possible implementation:
1. If the private key controlling a stake output signs a transaction, then:
(a) This transaction must have its whole fee subtracted from that stake output.
(b) This transaction must have all its inputs coming from other, normal outputs.
2. A private key controlling a stake output must sign every transaction.
Those restrictions have the following advantages:
1. The rich no longer can become richer merely by chaining blocks: the money thus created is only useful in paying for additional transactions, which increases fairness.
2. A network-related activity (chaining blocks) has a network-related (making transactions) rather than monetary reward, which increases consistency.
3. Chaining blocks becomes a requirement for making transactions, instead of needing some incentive, which increases network security by enforcing decentralization.
4. The ratio between the block-chaining reward (stake output) and individual transaction fee only means the maximum number of transactions allowed by the network, which reduces its adjustment to a problem of network administration rather than monetary policy.
5. No block-chaining reward (stake output) or transaction fee has any monetary value left, which keeps the money supply unaffected.