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Will Bitcoin Ever Move to Proof-of-Stake?

Will Bitcoin ever move to proof-of-stake? It’s likely one of the most contentious debates it all of crypto.

Bitcoin has faced a lot of criticism for the proof-of-work protocol it uses to reward miners, and verify transactions. This system has been criticized for being wasteful and expensive, despite incomplete evidence to support these claims. Some people believe that Bitcoin should move to a proof-of-stake protocol. Given the size of Bitcoin, the chances of moving to proof-of-stake is declining each day. It is a shame Bitcoin’s proof-of-work protocol is in doubt at all, and speaks to the short-term thinking characteristic of legacy proof-of-stake style hierarchies.

Technically, proof-of-stake is vulnerable to the same issues we see in legacy finance and government, which Bitcoin was created to solve in the first place.

In this writer’s opinion it would never make sense to move Bitcoin to proof-of-stake, except if it was desired that Bitcoin whales take control over the network. would never make sense to move Bitcoin to proof-of-stake, except if it was desired that Bitcoin whales take control over the network.

Will Bitcoin ever switch to proof of stake?

What is Proof of Stake?

Proof-of-stake is a proposed alternative to the proof-of-work protocol used by Bitcoin. With proof-of-stake, the creator of a new block is chosen based on the amount of their relative ownership of an asset, rather than any particular merit. This change would make Bitcoin much less energy-intensive, as miners would no longer need to invest energy to compete with other miners. While most cryptocurrencies now rely on proof-of-stake, Bitcoin remains on the proof-of-work standard.

The issue with proof-of-stake is that participants can increase their stake to exert more influence over the network. There are many Bitcoin wallets that hold a disproportionate amount of Bitcoin.

If Bitcoin were on proof-of-stake, it would already be at risk of manipulation. Ultimately, proof-of-stake represents the same limitations we see to democratic progress in nation states and companies as-is. If Bitcoin were based on proof-of-stake, it would only perpetuate the issues it was created to solve.

What is Proof of Work?

Proof-of-work is a requirement that ensures a direct relationship between energy input, and the function of the Bitcoin blockchain. It’s a protocol that is inherently more reliant on energy usage, but is much less susceptible to security issues.

For example, with proof-of-stake, influence over a blockchain can be increased by owning a larger relative share of the coins/tokens. This leaves a proof-of-stake system (like in legacy traditional finance) susceptible to the whims of wealthy stakeholders. On proof-of-work, it does not matter how many coins any given wallet has.

There are still risks to Bitcoin on proof-of-work. Two such risks are known as 51% attacks, and sybil attacks. In each case, the potential for success of the attack declines as the total energy usage of the Bitcoin blockchain increases.

Bitcoin was vulnerable when it was much smaller, but now has reached a size that makes it extremely unlikely any entity could amass the necessary resources. On proof-of-work, physical and digital infrastructure act as a concrete security protocol as opposed to digital-only on proof-of-stake.

How do Proof-of-Stake and Proof-of-Work Differ?

In proof of work, the algorithm rewards miners who solve a cryptographic “puzzle” by yielding an output within certain specifications. The point is that resources (electricity) need to be used as input as evidence of fair-play.

In proof of stake, holders of a cryptocurrency put their currency up as collateral to become a miner. Proof-of-stake is thought to be more efficient, because it doesn’t require the energy that proof of work does. However, proof-of-stake risks manipulation from actors who hold a relatively outsized stake of the crypto in question.

It’s not impossible to create a proof-of-stake network that is sufficiently decentralized and free from risk of manipulation. However, we have yet to see a proof-of-stake network demonstrate the level of resiliency and security that Bitcoin has.

Ultimately, Bitcoin is seeking to solve the problem of money being manipulated, and proof-of-work is doing the best job to provide a solution.

Will Bitcoin Ever Move to Proof of Stake?

This is a highly unlikely outcome, which would likely mark the end of Bitcoin if it did occur. As mentioned before, the current scale of the energy needed for any minority to hijack Bitcoin is becoming less feasible by the day.

Also, the core ethos within the Bitcoin community is well understood, and respected, so they would not voluntarily make a proposal for this to happen. If any actors were to succeed in taking over, it would have to come from outside the Bitcoin community from a group with colossal resources. This used to be a more significant risk when the majority of mining power was in China, but with that title now belonging to the United States, Bitcoin’s future looks more bright.

It would represent a massive setback to innovation in money if Bitcoin did move to proof-of-stake, because all the electricity invested into the network will have gone to waste. If Bitcoin can succeed as-is, then the world stands to gain a money it can use forever for a one-time energy investment. If this turns out to be the case, then humanity’s ROI on Bitcoin is theoretically infinite.

Proof-of-Work is Here to Stay

There is a lot of confusion and FUD (fear, uncertainty, doubt) that Bitcoin has major flaws in its design. Unfortunately, especially with regard to the proof-of-work vs proof-of-stake debate, these ideas are half-baked.

Thus far, Bitcoin is the only cryptocurrency with a fighting chance to fix the limitations of fiat currency. And theoretically, with Bitcoin’s proof-of-work protocol, we have the potential to secure a monetary network that could benefit humanity forever.

A proof-of-stake cryptocurrency is also an option, but has not yielded any convincing initiatives to date. If anything, proof-of-stake exemplifies many of the problems Bitcoin seeks to solve in the first place.

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Gerrit van Sittert

About the Author

Gerrit van Sittert

Gerrit van Sittert is a cryptocurrency investor keenly interested in the ramifications of blockchain technology. Since graduating from a commerce and entrepreneurship degree, he has specialized his knowledge of how cryptocurrencies are set to impact the global supply chain and emerging markets. He started his crypto journey in 2017 while hosting an entrepreneurial focussed meetup group in Victoria, BC.

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