Proof of Stake (PoS) is a consensus algorithm that allows cryptocurrency networks to validate transactions and create new blocks. It has gained popularity in recent years as an alternative to the energy-intensive Proof of Work (PoW) algorithm used by Bitcoin. However, despite the advantages that PoS may offer, there are several reasons why you should stay away from it.
Same problem solved but from different assumptions
While PoS and PoW are similar technologies, they have different approaches to reaching consensus. PoW relies on solving complex mathematical problems to validate transactions, which creates a long-term incentive for miners. The assumption of PoS, on the other hand, is to have a distributed consensus without involving a workload.
Basically the actors involved in PoS: don’t verify, they only trust.
Needless to say, that PoW implemented by Bitcoin is diametrically opposed to this approach. The assumption of PoW is to avoid any type of control and censorship to the consensus, and there is a price to pay for this: the energy. The assumption of PoS is to solve a problem just as a private company would have solved it.
Managed by Private Companies and Foundations
Major PoS projects like Ethereum are managed by private companies and foundations, which can obviously lead to centralization, not to mention the condition where anyone wants to stop Buterin: they would only have to ring at his door.
The major PoS implementations have a CEO, and they’re blackmailable. How to deal with Satoshi Nakamoto instead? With Bitcoin, no single entity controls the network, and the risk of centralization is remote or almost impossible if compared to PoS.
Staking tends to centralize assets
Another drawback of PoS is its tendency to centralize the asset. The more coins someone holds, the more power they have over the network. This can lead to a small number of individuals or organizations controlling the majority of the network, which is a significant risk for the system’s security.
Not tested as much as PoW like Bitcoin
It is undeniable that ERC20 is widely used in 2023, and it would be unfair to assert that it has no advantages for users (see Metamask, stablecoins, etc.). However, Ethereum used PoW for years to reach this result.
Then, in 2022, the “company” decided to switch from PoW to PoS and will be the first big project to implement PoS. So when people talk about PoS and mention Ethereum, we should remind them that it’s too early to make a comparison. Bitcoin PoW has been around for over a decade and has been extensively tested and reviewed by the community.
In contrast, PoS networks are relatively new (primarly Ethereum) and have not been thoroughly tested, which makes them more prone to bugs and vulnerabilities. Therefore, investing in PoS networks is inherently more risky.
PoW layers can be improved
Every networks that uses blockchain collides with scalability; but every layer is being constantly improved by developers and contributors. Some years ago people was not exactly happy about Bitcoin scalability, this is why Lightning Network was implemented.
The Lightning Network is a second-layer solution that allows Bitcoin to process more transactions per second. This second layer was added without jeopardizing the base one. This was a game changer for BTC and constantly attracting users and use cases.
Rather than simply adding a layer to something that was already up, running, and secure, Ethereum took a significant risk by adopting PoS.
People want freedom, not shortcuts
The PoS consensus algorithm aims to provide a less energy-intensive alternative to the PoW algorithm. However, Bitcoin’s philosophy revolves around freedom and decentralization, and taking shortcuts that undermine that assumptions is contrary to this philosophy. Therefore, it is crucial to remain true to Bitcoin’s principles and not be swayed by the promises of easy rewards offered by PoS. Freedom has a price to pay.
The Bitcoiners Community
The Bitcoin community has a well-established and widespread presence on social media, and its members are passionate about the technology’s potential. The community has played a significant role in advancing Bitcoin’s development and adoption, and it is more solid than the communities surrounding PoS projects.
Mainstream Media Bias
Finally, it is important to note that mainstream media often has a bias against PoW, with Bitcoin being a primary target. This is due to a lack of understanding of the technology, fear of disruption to the traditional financial system, and the influence of powerful interests. Therefore, it is essential to be wary of the negative narratives surrounding Bitcoin and do your research because PoS is a good technology if placed side by side to PoW, and not an antagonist.
In conclusion, while PoS may have some advantages over PoW, the risks associated with it outweigh the benefits. PoS networks tend to be managed by private companies and foundations, which can lead to centralization. The concentration of power in the hands of a few individuals or organizations is a significant risk to the system’s security. Furthermore, PoS networks have not been extensively tested, which makes them more prone to bugs and vulnerabilities.
As Bitcoin continues to mature and its community grows stronger, it is the better choice for those seeking to invest in a decentralized and secure cryptocurrency.
