Ethereum co-founder Vitalik Buterin thinks Bitcoin will ultimately have to contemplate a “difficult transition” to a Proof-of-Stake (PoS) consensus mechanism.
Buterin asserts in a new interview with Noah Smith that Bitcoin’s Proof-of-Work (PoW) algorithm is less secure than PoS and “unsustainable.”
The Bitcoin protocol is based on a check-and-balance technique known as Proof-of-Work (PoW). Although this technique ensures the blockchain’s immutability, it also requires a lot of power and consumes more of it as the coin’s value grows.
In contrast, Proof-of-Stake (PoS) is utilized by certain cryptocurrency protocols because it needs less computing power and may create blocks faster. It is not, however, as secure as PoW.
Meanwhile, Buterin claims that PoS may provide “around 20 times greater security [than PoW] for the same cost.”
Participating as a PoW miner has medium continuing costs and medium entrance costs, while participating as a PoS validator has low ongoing costs and high entry costs […] “It turns out that how safe you are is determined only by the entrance fees since that is what an attacker must spend to attack,” he continued.
Buterin shows that the cost of conducting an attack on a PoW blockchain is much lower than that of a PoS-based blockchain. Meanwhile, the running expenses of a PoS system are far lower than those of PoW systems, which need massive quantities of power to operate.
Buterin suggested that miners would lose the incentive to make the network safe as the Bitcoin supply drops.
He said that at the moment, the transaction fee from Bitcoin transactions would be the sole motivator for miners. Given Bitcoin’s role as a store of wealth, there won’t be enough transactions, and therefore there won’t be enough fees collected to operate the whole mining network.
Buterin believes that if a security breach happens, which is extremely probable if the number of miners defending the network decreases drastically, the PoW network will adapt the algorithm, “essentially burning all current mining gear.”
Furthermore, he stated that PoS enables the protocol to burn just the attacker’s assets, so the attacker pays a high price, but the “environment swiftly recovers.”
Importantly, Ethereum will shortly switch from PoW to PoS. Buterin says that by lowering the cost of network security and releasing new tokens, Ethereum will become more long-term sustainable. The Ethereum development team has proposed a September 15 release date.