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Why Proof of Stake cannot work, and if it somehow ever did, would be valueless:
As was its plan from inception, today ethereum will begin its upgrade to ETH2, along with a gradual switch to "Proof of Stake" as its consensus mechanism.
In short, rather than mining for a block reward like Proof of Work in bitcoin, ethereum consensus will be achieved through users acting as validators by staking their ETH.
The motivation being to avoid the growing energy consumption and environmental impact of bitcoin mining.
This rationale is idiotic but that's a thread for another day.
This rationale is idiotic but that's a thread for another day.
Even if there was something notable to gain by doing this (there's not), it would still be a horrible decision for several reasons.
1. PoS handles Black Swan events far worse than PoW.
When attempting to redefine the world's money system, we CANNOT afford to write-off the 0.01% doomsday scenarios as unlikely.
There are several bad scenarios where a PoS network has catastrophic results.
When attempting to redefine the world's money system, we CANNOT afford to write-off the 0.01% doomsday scenarios as unlikely.
There are several bad scenarios where a PoS network has catastrophic results.
ex1: network is forced offline
It's not impossible for silly bugs to cause network downtime for these blockchains.
In PoW, it is straightforward for nodes to reorganize when they're back up - they reach consensus on the chain with the most accumulated PoW (the most secure one)
It's not impossible for silly bugs to cause network downtime for these blockchains.
In PoW, it is straightforward for nodes to reorganize when they're back up - they reach consensus on the chain with the most accumulated PoW (the most secure one)
In PoS, nodes have no way to measure which chain is the "more correct" chain when the network is back up.
This creates an indeterministic scenario with new attack vectors and could lead to contentious hard forks.
This creates an indeterministic scenario with new attack vectors and could lead to contentious hard forks.
ex2: 51% attacks
In PoW, an attacker with majority hash rate actually cannot do much. Attempting to double-spend or alter the ledger costs a near impossible amount of money. It is not enough to simply gain 51% hash rate - there is an even larger hurdle after that to:
In PoW, an attacker with majority hash rate actually cannot do much. Attempting to double-spend or alter the ledger costs a near impossible amount of money. It is not enough to simply gain 51% hash rate - there is an even larger hurdle after that to:
a. spend a ton to re-write the past or cheat in the present
b. maintain either of these cheats for a long enough period of time for it to matter
b. maintain either of these cheats for a long enough period of time for it to matter
In PoS, gaining majority stake of the network gives the attacker nearly endless power. He/she can double-spend freely and alter the ledger however he/she pleases, at no extra cost.
It's also naive to think that the only way to gain majority stake of a PoS network is by purchases on the open-market.
There are several possible ways an attacker could get to 51% stake through extortion, kidnapping, torture etc. and would be more motivated to do so in PoS.
There are several possible ways an attacker could get to 51% stake through extortion, kidnapping, torture etc. and would be more motivated to do so in PoS.
It's more difficult to even get to the 51% nightmare in a PoW system, before considering that a PoW blockchain is far more robust to what could happen if it ever did occur.
2. No unforgeable costliness
All valuable collectibles in the history of human civilization - precious metals, beads, shells, furs, teeth etc - have shared this trait.
Our species is motivated to collect items that best satisfy this property.
All valuable collectibles in the history of human civilization - precious metals, beads, shells, furs, teeth etc - have shared this trait.
Our species is motivated to collect items that best satisfy this property.
The production of a commodity for the random sake of it being costly seems like a waste without reason.
But unforgeably costly objects add repeated value by enabling wealth transfers.
The cost, initially a waste, becomes amortized over multiple transactions.
But unforgeably costly objects add repeated value by enabling wealth transfers.
The cost, initially a waste, becomes amortized over multiple transactions.
PoS systems do not exhibit this property. All PoS involves is the temporary lockup of existing funds. It does not consume the capital that is used to stake.
This is not sound money.
This is not sound money.
3. The energy expenditure of BTC PoW is exactly what secures it
When a block is mined in bitcoin, the energy expended to do so doesn't just secure the UTXOs of that block, but ALL UTXOs in the blocks preceding it. Each new block basically "buries" existing UTXOs.
When a block is mined in bitcoin, the energy expended to do so doesn't just secure the UTXOs of that block, but ALL UTXOs in the blocks preceding it. Each new block basically "buries" existing UTXOs.
At the same time, when mining operations invest into GPUs and other specialized equipment, they are effectively securing the future value of the ledger. The sunk cost of the hardware represents future work and energy expenditure that will be done to secure the network
PoS fails in both of these areas.
Old stakes do not accumulate over time, because stakes are released after some defined bonding period. There is no compounding security value to PoS.
PoS fails to secure the past.
Old stakes do not accumulate over time, because stakes are released after some defined bonding period. There is no compounding security value to PoS.
PoS fails to secure the past.
Staking also provides zero future security as it only matters during the bonding period in which it is active. There is no accumulating effect of future staking value.
PoS fails to secure the future.
PoS fails to secure the future.
The cost of PoW mining is a feature, not a bug.
There's nothing to "fix" here.
There's nothing to "fix" here.
