The two most popular consensus mechanisms in the blockchain industry today are Proof of Work (PoW) and Proof of Stake (PoS). These mechanisms shape the way cryptocurrencies operate and also hold profound implications for the future of decentralized systems.
In a recent presentation at the Proof of Work summit, Donald Mcintyre, founder of Etherplan, a global wealth management platform on Ethereum, and co-founded Global Financial Access Inc. offered a comprehensive analysis of these two competing philosophies, stating that proof of work is not as dangerous as it seems. He also added that Ethereum Classic remains a potent asset in the industry.
Proof of Work Assets
Donald first noted that Proof of Work (PoW) blockchains, despite their decentralized nature, are susceptible to forking, resulting in a lack of consensus.
He argued that this inherent vulnerability makes them unsuitable as forms of currency.
He further highlighted the notion that PoW proponents often champion the concept of “code as law.” According to this perspective, the rules of the blockchain are considered immutable, and there’s a general skepticism towards third-party interventions.
When it comes to innovation and security, he drew attention to Bitcoin, a prime example of PoW, which is renowned for its innovative features and robust monetary policies.
In terms of security, PoW-based decentralized applications are widely regarded as more resilient compared to their counterparts running on external systems or cloud services.
Donald also told the audience that one of PoW’s fundamental strengths, its resistance to centralization, was intentionally crafted to counteract the influence of governments, corporations, elites, and special interests.
In light of global developments such as the emergence of government digital passports and central bank digital currencies (CBDCs), he suggested that PoW blockchains might serve as a vital tool in safeguarding against potential technocratic control.
Furthermore, he contested the notion that PoW blockchains must implement subjective rules to prevent 51% of attacks, maintaining that the physical barriers inherent in PoW, combined with alternative security measures, ensure robust security.
Debate for Proof of Stake Infrastructure
Conversely, the Etherplan founder also spoke about the unique state of Proof of Stake (PoS) blockchains. He explained that while PoS promotes the concept of social consensus, this can lead to irregular state changes, account balance adjustments, and even censorship in specific situations, which is not a good aspect of PoS.
He also spoke about the advantage of staking for PoS. The introduction of staking as a consensus mechanism in PoS facilitates global participation with minimal geographic or technical obstacles. However, it might encourage the formation of larger staking pools.
Donald praised the programmability that exists in the PoS-based Ethereum which has enhanced its versatility and adaptability through smart contracts.
This singular feature has been the driving force behind hundreds and thousands of web3 projects that have been built and launched including blockchains, games, payment rails, cryptocurrencies (stablecoins inclusive), and others.
He added that the debate regarding finality often leans in favor of PoS due to its deterministic finality compared to PoW’s probabilistic finality.
Nevertheless, Donald pointed out that the likelihood of transaction reversals in PoS is higher than in PoW, where the substantial physical barrier of mining acts as a protective measure.
The case for ETC
In comparing the strengths and weaknesses of PoW and PoS blockchains, the speaker affirmed that Ethereum Classic (ETC) stands out as a unique combination of PoW and smart contracts.
This has contributed to making it the largest PoW-based smart contract blockchain and the sixth-largest PoW blockchain overall.
Ethereum Classic (ETC) is an open-source, decentralized, blockchain-based distributed cryptocurrency platform that runs smart contracts.
It was formed in 2016 after a disagreement within the Ethereum community over how to handle a hack that occurred on the Ethereum blockchain.
Ethereum Classic maintains the original, unaltered history of the Ethereum network. Here are some key points about Ethereum Classic.
It allows developers to build and deploy smart contracts, which are autonomous, self-executing code blocks that trigger certain actions based on predefined conditions.
He said that the fixed supply cap and programmability of ETC positions it as a powerful tool for financial and decentralized applications.
As ETC has a fixed supply cap with a significant number of coins yet to be mined, mining revenues are poised to reach substantial levels, further solidifying its position in the cryptocurrency landscape.
At the end of his presentation, Donald debunked the claim that PoW is inefficient. He stressed that the energy expended in PoW is the foundation of its security, offering unparalleled benefits, including consensus, entry points, transaction history protection, and the creation of hard money.
While each consensus mechanism has its strengths and weaknesses, it’s clear that PoW, with its historical resilience and unique attributes, continues to play a pivotal role in the blockchain ecosystem.
