Vitalik Buterin, the founder of Ethereum, recently was invited to the StartmeupHK Festival 2021 technology conference in Hong Kong where he gave a speech. Among many topics in the blockchain, Vitalik shared his views on the much-anticipated shift of Ethereum from Proof of Work (PoW) to Proof of Stake (PoS).
According to Ethereum’s latest roadmap, the transition is expected to take place sometime between 2021 and 2022. Although Ethereum planned this transition at its inception, the blockchain industry and the Ethereum community have been discussing for a long time about either PoW or PoS is the better consensus mechanism.
Vitalik states that “I’ve liked PoS for many years because it requires less resources, and it doesn’t require to buy mining equipments from manufacturers. Nor does it consume a lot of energy like PoW. Normal computers can be used to run PoS. You can run PoS verifier nodes on you your own computer. So this approach is much less resource intensive and does not burden the environment. Another reason is that based on PoS, the blockchain doesn’t need to pay as much to network maintainers (miners) as PoW does. Currently Bitcoin and Ethereum both provide about 4% of the total supply to miners every year. For Ethereum, there are about 4.7 million new ETH issued every year, and the current total supply is 115 million ETH. But with PoS, we expect to add about 500,000 to 1 million ETH per year, which means the total supply will not increase too fast.”
Regarding security, Vitalik explains the advantages of POS that: “I think PoS is very secure because if you want to successfully attack the Ethereum network, then you basically need to have the amount of ETH that is staked in the entire network. For example, right now we have 5 million ETH staked (in the beacon chain), and then you (the attacker) need to have 5 million ETH. I think that’s more expensive than even attacking the Bitcoin network; secondly, PoS mechanism is easier to recover from an attack than PoW. In PoS we have a lot of measures against attacks, for example we have automatic slashing (forfeit) mechanism that burns coins staked by the perpetrator, and the community can also respond to (successful) attacks by coordinating a soft fork. The attacker will lose a lot of tokens in the new chain.
However, proponents of POW hold a completely different perspective. KF, a member of the Ethereum community, refuted Vitalik’s view.
He argues that in terms of efficiency, PoS proponents often have an advantage in the PoW/PoS debate: a fully decentralized proof-of-stake system doesn’t exist yet, which means supporters are free to assume the eventual solution will be arbitrarily efficient and Known mining algorithms are not perfectly efficient (e.g. selfish mining) and there is no reason to believe that proof-of-stake systems will be perfectly efficient and elegant. -stake systems will be perfectly efficient either — but until the solution is fully specified proof-of-stake systems don ‘t have to account for any specific strategy validators might use to game the system.
In terms of future growth potential, PoW competes with other projects for energy in the short term, but in the long term it subsidizes the development and production of cheap energy which lowers the cost of electricity (both financial and environmental) for everyone over time. Cheap electricity will enable new technology and more production.
Proof-of-stake competes with other projects for capital in the short term, but it cannot subsidize the creation of more capital so it will also raise the cost of capital for everyone over time. More expensive capital means fewer projects — less factories but also less research.
KF shared a similar viewpoint. According to him, PoW encourages investment in the future while PoS discourages it. PoW exists and has demonstrated that it works at scale but PoS still begs the question.