PoW Vs. PoS: Cardano Creator Attempts to School Bitcoin Maximalists

Which School of Thought is Right?

The crypto market’s attention is clawing back to altcoins as they continue to gain enormously. Bitcoin’s dominance is now down to 63% and the lack of volatility in Bitcoin is supporting altcoin rise at the moment.

Many enter the crypto markets for quick gains. However, there are ‘hodlers’ who decide to stay longer because of long-term gains or in parts to take part in the decentralization movement.

The market has numerous alternatives to the first cryptocurrency, Bitcoin (hence, altcoins). They offer faster settlement and most importantly a variety of consensus methods that avoid PoW and make things digitally efficient. However, according to Maximalists, the problem lies with the existence and distribution of pre-mine coins which affects the security of the network.

Baseball and Steriods

Jimmy Song, a cryptographic developer and blockchain expert compares PoS with baseball and periods. He expresses disappointment in “how willing Charles is to lie about all this.” Furthermore, Tone Vays argues in this YouTube interview bashing Cardano and other altcoins that,

“If your hard fork is going seamlessly, you’re centralized. If you’re planning to eventually decentralized, you’re centralized. And, If your CEO is taking bailout money for a company that prints its’ own money, well…”

For Song, ‘Proof of stake is like a paper vault, its got no security at all.’ It is because the stakeholders are the creators of the tokens itself. He believes that work should be done or energy must be spent to earn a cryptocurrency.

Hoskinson’s Reply

According to Hoskinson, as the price of the token increases, it drives more participants at the staking level producing blocks. He portrays that PoS is inversely proportional to a path towards decentralization, while PoW leads towards it. He has compiled multiple academic papers since 2013 citing the drawback of PoW and its’ effect on decentralization. He implores Vays and Song to go through them.

The reason for this is the development of ASIC hardware, patents on designs and the ‘economy of scale.’ Apart from many reasons, one can confirm that his implication on economies of scale was incorrect. It is true that it is easier for larger entities to cut their costs. However, it is limited to a certain extent and competition is important in a free market economy as well. Moreover, this is true for all free capital markets.

Nevertheless, there is no reason to disagree that PoS has a lot of advantages.

A Healthy Argument

Last but not least, the debates over the centralization of pre-mine tokens is not new. Particularly with Ethereum, as it being shifted from PoW to PoS. In PoS, the stakeholders are rewarded according to their stake which could motivate the stakeholders to hold onto their share, instead of distribution.

Hasu, a crypto researcher and developer argues that over time staking yields rewards leads to decentralization, like Ethereum began with 72 million pre-mine ETH, which now accounts for 62% of the coins and is reducing periodically. However, Nic Carter states,

it only gets smaller over time if there’s continued PoW distribution. moving to PoS – or starting directly with PoS, as many chains do – freezes the distribution in place.

However, large-scale miners do add barriers to entry to new participants with cheap electricity and top-of-the-line hardware.

Which is the most effective way to achieve decentralization: PoS or PoW? Please share your views with us.