Much of the recent discussion in the blockchain space has focused on Ethereum and its decision to move to a proof-of-stake protocol. Most notably, the move has led to a false narrative that a decentralised, scaled, and secure blockchain cannot exist, says Bryan Daugherty, Founder of SmartLedger in a recent article published on CoinGeek, ‘Proof-of-stake is proof of misunderstanding.’
Proof-of-stake is proof of misunderstanding
Daugherty pointed to a recent Bloomberg article which declared that blockchains now face a ‘trilemma’. It posits that as the volume of activity involving tokens like Bitcoin and Ether grows, the slower and costlier it becomes to record and secure each transaction. There are various efforts to fix the problem, but all either make the system more vulnerable to bad actors or water down the decentralised model that’s key to crypto’s appeal.
However, what the ‘blockchain trilemma’ really suggests is that because ETH and BTC developers can’t figure out how to scale, no one can, Daugherty said. He pointed to the continued success of BSV in these areas as evidence that this is not the case.
‘In an ideal world, proof-of-stake (PoS) solves one of the crypto industry’s biggest problems—the infamously high carbon footprint of crypto mining. Crypto’s excessive energy consumption is a well-known fact and one that has led to proof-of-work (PoW) becoming synonymous with outrageously high energy expenditures. But this conflation doesn’t provide an accurate picture of PoW or PoS.’
‘Proof-of-work blockchains were designed to scale to provide the security and interoperability required to improve and replace existing currency exchanges. Scaling proof-of-work to allow for more transactions per block per second significantly reduces energy consumption by default. That a simple change in consensus mechanism will provide a more sustainable, affordable, and scalable protocol than proof-of-work is baseless.’
This is because proof-of-stake networks like Ethereum’s Beacon Chain aren’t blockchains, said Daugherty. Instead, they have distributed ledger networks that mimic the structure and processes of real blockchains without any of the utility, security, or scalability.
Energy and security concerns around blockchain
Daugherty noted that there are also misconceptions about the energy usage of proof-of-work and how secure proof-of-stake platforms are.
While proof-of-stake is assumed to use 99% less energy than proof-of-work, this is little more than an idealistic theory because no system yet exists to measure the carbon footprint of proof-of-stake, he said.
This means that as damaging cybersecurity breaches continue to make headlines, Ethereum owners are accepting substantial risk in exchange for ‘projected returns’ that aren’t based on any factual assumptions of the new economic dynamics, Daugherty warned.
‘Imagine if Visa was using too much energy to protect the data of its customers and switched to a system that claimed to use less energy, but provided a fraction of the security. Would you continue to trust Visa, or would you take your business elsewhere?’
‘That’s what’s happening here. We all want a more sustainable and eco-friendly future, but it can’t be at the cost of necessary security.’
Blockchain scalability and fees
Daugherty noted that some of the other supposed benefits of switching to proof-of-stake are unlikely to materialise for Ethereum users.
Hefty ‘gas fees’, which have reached up to $194 per transaction aren’t going away with The Merge. Ethereum’s website says that The Merge will not result in lower gas fees or noticeably faster transactions because the transition is not an expansion of network capacity.
‘Realistically, the probability of forks and reduced rewards means The Merge will likely lead to increased gas fees. If the network has already reached its maximum capacity and still can’t scale, what problems does transitioning to proof-of-stake actually solve? None.’
The BSV blockchain: it just works
With Proof-of-work all three properties are achieved because they exist simultaneously, and the more transactions there are on the network, the more decentralised and secure it becomes, said Daugherty.
‘While the majority of blockchain experts understand and respect the security of proof-of-work, they have discounted the scalability potential. As a result, Ethereum is turning to The Merge to solve key issues that the proof-of-work protocol was designed to eliminate in the first place,’ he said.
‘If all Ethereum is doing by merging to Beacon Chain is mimicking existing financial systems with less security, scalability, and affordability, what is the point? Who benefits?’
