The holiday season would not be the same without people within the family fighting over something – or in the case of crypto, people within the community fought over consensus mechanism Proof of Stake (PoS) and its merits over Proof of Work (PoW.) As is tradition, in the end nobody really won and everyone is left with a bruised pride, mostly.
It started with Saifedean Ammous, a professor of economics at the Lebanese American University and author of The Bitcoin Standard, tweeting, “Anyone who believes proof of Stake can work is either: 1- completely clueless at to how and why Bitcoin works at all. 2- a con artist using it as a buzzword to promote a worthless scam like Ethereum.”
His rant is far from over, however, as he continued:
Proof of Stake is no different than the Federal Reserve system, which is owned by its constituent banks, who have a monopoly on increasing the money supply you are forced use. It's the problem Bitcoin solves with proof of work by making money creation hard for everyone.
— Saifedean Ammous (@saifedean) December 25, 2018
Proof of Stake is a consensus mechanism which states that a person can mine or validate block transactions according to how many coins they hold. This means that the more coins owned by a miner, the more mining power they have. This is different from the consensus algorithm that Bitcoin and some other cryptocurrencies use: Proof of Work, which requires a significant amount of computing power in order to solve computationally heavy puzzles.
Ammous explains his viewpoint further: “In proof of stake, the owners of current coins have an incentive to reward themselves with new coins, devaluing the coins of others. It’s easy money. In proof of work, new coin creation costs the same for everyone, ~= coin price. That’s hard money.”
It turns out that he is not the only one open about his disbelief for the PoS consensus mechanism. Bitcoin fund Adamant Capital founder Tuur Demeester tweeted, prompting one of the biggest proponents of PoS, the co-founder of Ethereum Vitalik Buterin, to come forward to address this:
– What works today (L1) is just a phase, ideal and unproven future (usable L2) is to come
– Utopian concept of progress: we're already so confident we're finished we ain't needin no hard forks
– Utopian future: hyperbitcoinization
I can play this game too! 😊
— Vitalik Non-giver of Ether (@VitalikButerin) December 25, 2018
The community was pretty divided on this point as well. Reddit user u/Robby16 writes about Ammous, “He wrote a great book about Bitcoin but anyone who says smart contracts are a scam are fkn not technical at all. There is huge pros with immutable contracts and code.”
Comments about Demeester’s view follow similar suit: “You are describing humanity and the way in which all progress is made. Dreaming of a better future. Working towards that future. Some things work and others do not. The alternative is stagnation and fear,” writes Bob Summerwill, co-founder and chief technology officer of blockchain contracting and consulting company Varro Technologies.
Twitter user @nsguajiro agrees, “Invalid argument. You could make equal comparisons of ETH to capitalism, as well as many other non-crypto things. It’s apples to oranges. Also, all no crypto is proven yet, and the algo isn’t the only factor. Insufficient data to know which algo is best.”
However, there are those disagreeing with Buterin as well. After he tweeted, “I don’t believe in proof of work!” the Head of Research at crypto asset management company CoinShares, Christopher Bendiksen, replied, “Well that’s the whole point of it. Unlike PoS you don’t have to believe in anything or in anyone, you can check for yourself. Also, your own coin uses PoW. As I’m sure you can understand tweets like these are not very reassuring.”
Others were also quick to remind that Ethereum itself is using PoW and that it’s estimated transition to PoS might not end well.
"…in order to sell my new shiny respiratory system substitute to illiterate investors, with pseudoscientific marketing entirely based on lies about how bad the current respiratory systems are and how sound CO2 breathing theories are."
— Giacomo Zucco [BEFORE Jan/3🔑] (@giacomozucco) December 25, 2018
Proof of stake will signal the end of Ethereum. Massive shorts incoming. #PoW
— Jon Matonis (@jonmatonis) December 26, 2018
Meanwhile, Jimmy Song, a Bitcoin Core developer and partner at Blockchain Capital, a venture capital company, mimicked Buterin’s way to back his statement:
— 𝐓𝐡𝐞 𝐃𝐞𝐬𝐢𝐠𝐧 𝐅𝐥𝐚𝐰 [Jan/3🔑] (@TheDesignFlaw) December 25, 2018
Most other replies follow similar paths, showing the division of the community on this topic. And thus it concludes, like your usual Christmas fight, as we said: with bruised egos and no real resolution.