- Vitalik Buterin says Bitcoins PoW model is inefficient.
- The ETH co-founder believes a PoS system can offer better security for lower costs.
- He predicts that at some point, the number of miners in the Bitcoin network will drop.
Vitalik Buterin, co-founder of Ethereum, has stated that he believes Bitcoin will eventually have to consider a “painful transition” to a Proof-of-Stake (PoS) consensus mechanism.
In an interview with Noah Smith published today, Buterin claims that Bitcoin’s Proof-of-Work algorithm (PoW) is less secure than PoS and “unsustainable.”
Bitcoin’s protocol relies on a system of checks and balances known as Proof-of-Work (PoW). Although this mechanism assures great immutability for Bitcoin’s blockchain, it also consumes a lot of electricity and uses more of it as the coin’s value rises.
In contrast, Proof-of-Stake (PoS) is used by some protocols for cryptocurrencies since it requires less processing power and may generate blocks more quickly. However, it is not quite as secure as PoW.
Meanwhile, Buterin argues that PoS can buy “something like 20 times more security [than PoW] for the same cost”.
Basically, participating as a PoW miner has medium ongoing costs and medium entry costs, but being a PoS validator has low ongoing costs and high entry costs […] It turns out that how secure you are, depends on just the entry costs, as that’s what an attacker has to pay to attack,” he added.
In simple words, Buterin explains that the cost of launching an attack on a PoW blockchain is far less than that of a PoS-based blockchain. Meanwhile, the operating costs of a PoS system are far less than that of PoW systems which require huge amounts of electricity to function.
Buterin proceeded by saying that as the Bitcoin supply shrinks, miners would lose motivation to keep the network secure.
He pointed out that the transaction fee accrued from Bitcoin transactions would be the only motivation for miners at that time. Given Bitcoin’s status as a store of value, there won’t be a lot of transactions, and thus, not enough fees would be collected to support the entire mining network.
Buterin claims that if a security breach occurs, which is highly likely if the number of miners securing the network shrinks dramatically, the approach of a PoW network will be to modify the algorithm, ” which effectively burns all existing mining hardware.”
Furthermore, he added that PoS allows the protocol to burn the assets of only the attacker, so the attacker pays a lot, but the “ecosystem quickly recovers.”
Importantly, Ethereum will soon replace PoW with PoS. Buterin claims this will make Ethereum more long-term viable by cutting down the cost of maintaining network security and issuing new tokens. The Ethereum development team has announced a possible release date of September 15.
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