2021-05-15 19:37:31
Deep dive - Proof of work is non-negotiable. Proof of stake is a terrible consensus model
Another long post. I request that you bear with me and I hope this allows people to understand that proof of work is non-negotiable for a public blockchain.
We've grown into this habit of dismissing even the most legitimate fact-based criticism as FUD so I'm not going to specifically mention any names here at all but just focus on proof of stake as a consensus model vis-a-vis public blockchains.
Last cycle, they were shilling you blatantly centralized consensus models like dPOS and private, permissioned blockchains where, just like the banking system, there was no way for the user to verify the truth. You just had a bank account. Except, instead of trusting bankers, they asked you to trust a handful of strangers from across the world with little legal recourse. You don't need a blockchain for this but people actually ate this shit up!
This cycle, it's all about how POS is the way forward because POW consumes too much energy. People are actually suggesting, with a straight face, that Bitcoin should switch to POS. Seriously? Talk about the tail trying to wag the dog. Should be careful mentioning dogs, lest another scammer gets inspired to create a $10 billion mcap token for less than 2 minutes of effort.
The ubiquity of ignorance and blissful dunning-kruger-fest on social media with regards to proof of work after all these years is disappointing. Even more disappointing is how individuals who are looked up to by the masses irresponsibly let down the masses by not doing their research and falling prey to scaremongering media coverage.
It's time to educate some of our misguided crypto brethren why proof of work is absolutely indispensable for blockchains. Indeed, if you're thinking about a non-POW blockchain, you really don't need a blockchain.
Speaking of effort, that's the whole point. If there is no effort, then the consensus model is doomed. Work is the most fundamental criteria for a blockchain protocol. Not only does it make the network unassailable, but it also ensures that there is no barrier of entry for absolutely anyone anywhere in the world to participate in the network, do the work and be rewarded. You simply cannot eliminate this property of permissionless for a public blockchain. Non-negotiable!
Perhaps most critical of all, mining provides the value anchor for blockchains, as a factor of real-world expenditures. That's why Bitcoin's price evinces a close correlation to its hash rate! Next time someone asks what Bitcoin's value is based on, tell them Bitcoin's value is based on the real-world cost expenditure undertaken by miners.
Only without proof of work, a blockchain asset's value is based on nothing. The asset is as good as a dog meme token.
Not only that, with a proof of work network, miners are required to constantly upgrade their hardware, entailing continual overhead cost. This ensures that newly generated coins are equitably distributed across the network, controlled only by the supply/demand dynamics. With proof of stake, there's no real-world cost, no overhead cost, zilch! This means the big boys keep increasing their share and clout by gobbling up the supply inflation and dumping the actual inflation itself on the little fellas. Sounds familiar? Bingo! That's fiat money. #CantillonEffect
With proof of stake, if a handful of rich people buy up enough coins, they'll become your masters. Proof of work constantly moves money the other way, diluting the concentration of wealth from the rich to the poor as the number of wallets increase.
But miners control POW blockchains, right? Wrong! This always makes me chuckle when people say it with such conviction. Instead of me explaining this one, I urge you to read this from the Bitcoin wiki.
With permissioned staking models, the government can easily take them down since there are a finite points of failure. This is amplified by centralized exchanges as most people will
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