Proof-of-Disagreement: Bitcoin’s Work vs. Ethereum’s Planned Staking

Different purposes

For some diehard Bitcoiners, the PoW vs. PoS debate isn’t even worth addressing. One BTC developer told Cryptonews.com that he isn’t the right person to comment for the purposes of this article, adding, “I don’t use shitcoins.”

However, less partisan commentators are willing to acknowledge that proof-of-work and proof-of-stake each have their own strengths and weaknesses, although many add that PoW is generally better for Bitcoin than PoS.

“While PoW is certainly a more time-tested model for securing and minting new coins on blockchains like Bitcoin, it requires huge amounts of energy, which some would even consider a feature. PoS, on the other hand, isn’t’ as energy-intensive and is better at scaling blockchains,” said Mike Colyer, the CEO at crypto-mining finance company Foundry.

On the flipside, Colyer added that PoS is “theoretically more prone to centralization and has the inherent security issue of using the native tokens of a blockchain to decide the future of those tokens or the blockchain.”

Even people on the Ethereum side of the debate acknowledge that proof-of-work has its strengths, and has certainly provided the crypto industry with a strong foundation.

“One of the strongest advantages of proof of work is that it has worked as the chassis for cryptographic security for over 10 years, and now secures a trillion in value. It is technically and economically complex, which plays a role in attracting specialized mining companies to the work of maintaining the network,” said Lex Sokolin, the global fintech co-head at Ethereum-focused major blockchain company ConsenSys.

This diplomacy aside, Sokolin also affirms that PoS offers various advantages, while still providing many of the key properties of PoW.

“Proof of stake is an easier-to-understand system, which allows easier participation through the staking of capital. It is also able to achieve similar security outcomes without the electricity consumption of the proof of work mechanism, and has been proven to work through a number of smaller but functional crypto economic networks,” he told Cryptonews.com.

Sokolin went on to explain that PoS is ideal for a network such as Ethereum, which is aiming to provide the digital infrastructure for a future decentralized/crypto-based financial system.

“The blockchain-based economic activity that we see is now far above and beyond moving one type of value around on a single protocol. Rather, we see software executed by a global network across payments, lending, banking, investing, and insurance substitutes,” he said.

According to Sokolin, this is the main reason why Ethereum needs PoS.

“As decentralized applications become more complex, performant, and key to people’s lives, the underlying network similarly requires a more modern architecture,” he added.

PoW + Bitcoin = A match made in heaven?

Yet even with the assumption that proof-of-stake may be superior on balance to proof-of-work, this doesn’t necessarily mean that Bitcoin needs or would benefit from a transition to PoS.

“For Bitcoin, which is meant to be a reliable and long-term store-of-value, PoW provides a unique model in which miners are incentivized to compete with one another to secure the network. Consequently, miners place an irrevocable stake in bitcoin by building specialized mining infrastructure and constantly purchasing energy,” said Mike Colyer.

He added that, personally, he does “not think there could be a better model for Bitcoin” than proof-of-work, a view shared by other members of the industry.

“Once these two commodities [energy and capital/specialized hardware] are staked, there is no way to un-stake that energy or use the mining equipment for anything else. This is in stark contrast with PoS networks, where the stake itself is the currency of the network — as a result, it can be devalued if the value of its underlying currency drops,” said Nishant Sharma, the founder of crypto-mining consultancy BlocksBridge.

It’s also likely that, even with its reportedly vast energy consumption, Bitcoin is unlikely to move from PoW.

“Bitcoin miners are economically incentivised to mine in regions with cheapest electricity. Normally, those are regions with either electricity generation overcapacity or an abundance of renewable energy,” said Colyer, adding that Bitcoin could have “a near-zero environmental impact” even without leaving PoW.