Going Full POS in less than 700 Blocks
Why PoS is Better than PoW
If you have been exposed into the crypto community for a while, then you would have heard of PoS (Proof-of-Stake). It is a mining concept available to some of the traded coins, which bases the coins you mine depending on the amount of coins you possess, meaning a person who owns 1,000 coins would mine more than a person with 10 coins regardless of their computing power. Some people would welcome this concept, while some would shun away from it as they continue to be skeptics; but as coins like Etherium (ETH) are starting to warm up to PoS, there must be some advantages to this type of mining, but what could they be? From what I can gather, these are some fundamental benefits for PoS.
ResourceThis is perhaps the most obvious advantage of PoS. As PoW uses massive amounts of computing power, it also comes with a huge toll on the electricity bill, not to mention the deterioration of your mining computer. I would say, thousands of heavily powered computers around the world would have a huge green house effect. With PoS, you would be able to stake using something as simple as a Raspberry Pi (USD 35), which only uses a very small amount of electricity would enable you to stake more coins compared to a super computer. That’s assuming you have more coins staking on your Raspberry Pi. The effects are especially visible for countries with high electricity costs. For people worried about large electricity bills and global warming issues, this is the obvious choice.
Price VolatilityAs you know, the miners serve as nodes who guard the ledger and confirm transactions, which in turn enables them to earn coins by solving hashes in the blockchain. It is up to the miner to decide whether to keep or sell the earned coin. As mining is expensive as mentioned above, you can’t blame miners for selling the coins they earn. The problem is, if there’s not much demand for a coin, this pushes the price down. As some miners would sell, the other holders would get jittery and… you get the point. Perfect example of this is the anon coin, ZCash, which plunged the price by a fraction of what it already is (around USD 35) as miners would automatically just sell all coins to the highest bidder. Speaking of anon coins, if you compare anon coins like ZEC, XMR and SDC (SDC being the only PoS), you can find which coin is the most stable.
The reason why a PoS would give you price stability is because it gives the person more incentive to keep the coin than to sell. If a miner could make more coins using the coin that he mined from, he would think twice before selling.
DecentralizationThe reason why PoW is so popular is because this is what Bitcoin has introduced. This has provided the global community with a decentralized form of currency. People imagine their humble computers would serve as nodes keeping all the transactions safe. However, as entities like China have invested a few billion dollars worth of supercomputers with the sole purpose of mining bitcoins, enabling them to mine a huge chunk (I would say around 80% of all mined coins). Isn’t that in a way, a centralized currency?
PoS would minimize that possibility as it would provide tons of risks for China or any other entity planning a buy-out. Would a staker sell his principal coin to anyone if he’s guaranteed a certain cashflow? Within that scenario, stakers would realize that the longer you hold, the more expensive your coins would get.
SecurityOf course there are both upside and downside in terms of PoS and PoW security, but the most important part of securing a coin is arguably by protecting its blockchain.
Compromising a blockchain involves inserting incorrect information into the data where the whole decentralized system would accept; in order to do that, you would need a large amount influence. When we talk about influence, PoW and PoS would classify them differently. PoW is measured by computing power, where PoS uses coin ownership.
If a malicious Super PC (the billion dollar PC China already has) would want to compromise a competing coin, he only needs to stop mining on his coin for a few hours and target the coin. That way, a competing coin would lose credibility and investors would just opt to buy their coin. For PoS, you would have to own a large amount of coins. A large enough amount to be able to land an impact into the ledger, which would be very expensive; and why would you want to compromise something that you have spent a lot of?
Conclusion:Of course, we can give a lot of counter-arguments to rationalize why PoW is still an effective way to maintain a blockchain. Do not get me wrong, I believe PoW is very effective; the technology has managed the BTC blockchain for years, which is why BTC continues to increase its popularity. However, there is a difference between effectiveness and efficiency. PoS coins not only are as effective as PoW, it also offers more practicality based on my given reasons.
Source: Decentralize.today
