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Why Bitcoin loves Proof-Of-Stake and how PoS benefits BTC

*Disclaimer*No Bitcoin will not be transitioning to POS.

Everybody already gets it, Bitcoin is & will forever be the OG. The god & grandfather of all cryptocurrency to come.

This then begs the question;

“If Bitcoin really is the superior system, how-or-why would anyone allow for Proof-Of-Stake to take over?”

First and foremost, Bitcoin is a decentralized monetary network built upon a consensus mechanism called Proof-Of-Work. POW is a (sybil) fault-tolerant mechanism that leverages electrical energy for the securitization of network activity. Once viewed as a marvel of society, PoW has been receiving tremendous backlash from nations & individuals worldwide for its “unjust” energy consumption.

This is a topic outside the scope of this article, however, this author is of the opinion that people who blindly ingest information that is distributed by mainstream media are just plain sheep. I’m not saying that Bitcoin is green, I am saying that it is worth looking deeper at factors like where the energy for it is sourced from and a cost analysis on how much value is provided in return for the energy. DYOR.

This backlash has become a prime opportunity for an alternative consensus mechanism to establish its prominence; hello Proof of Stake. PoS, in simplest terms, is a mechanism that substitutes energy consumption with monetary value; instead of dedicating machines for security, people must dedicate their money. This displacement of the tool with which a network is secured, has understandably, put POS in a controversial position in the eyes of many decentralization maximalists & cypherpunks.

While I personally am of the opinion that the future will be composed of multiple different blockchains, consensus mechanisms & crypto architectures; I stand that PoW will remain the purest form of security for money as a whole. I do not have any immediate problems with PoS, after all, as you are about to find out, it benefits Bitcoin!

Proof Of Stake definitely has many elements to its design that deserve merit, such as superior transaction finality and throughput. At the same time, it does so at the cost of lesser decentralization and lower fault tolerance than POW.

But before we get too caught up in a technical “whose better” jibber jabber, let’s remember that this is not a discussion about consensus mechanisms or decentralization. This is a discussion about power.

No matter what might happen in the event that all alternative cryptocurrency transfers away from POW, there are three things that can be guaranteed:

  1. Electrical energy will not cease to exist.

  2. Nor will Electrical energy cease to be consumed.

  3. It will merely find a new application.

This leads to the subject of this article;

How TF does Bitcoin benefit from POS?

At any given time, there is a finite amount of energy available for a given purpose. In the event that there are no other networks competing with BTC for energy from the electrical grid; that would in turn mean that BTC becomes the single, WHOLE consumer of electricity for the crypto industry & in fact BECOMES, the electric grid. (obviously, even in POS there is a microbial level of energy consumption required to run the hardware that is connected to a network, but it is insignificant in comparison to BTC mining.) Let’s not split hairs trying to compare a lightbulb to a gigafactory.

Moreover, by removing competition for electrical energy, the prophecy of Bitcoin only strengthens. People tend to think that competition is a good thing because it signals market demand. That is not untrue, however, Peter Thiel has been able to sum up the delicate nuances of competition through an elegant quote: “All failed companies are the same: they failed to escape competition.” With no competition, Bitcoin is able to play its own game.

Additionally, this power restructuring frees up the creative space for people to manufacture more advanced mining machinery. Rather than having to create a multitude of different sub-optimal equipment for different systems, more laser-focused efforts can be put to solving a single problem. Yes, this may cause higher centralization as the evolution of mining has proven; ASIC machinery might be out of reach for regular everyday people. However, when the stakes are this high, there is something magical in being able to trust open market forces of competition between corporates & governments, which brings unbounded levels of security.

They say that time is the ultimate test.

Well, I believe that as time goes on, more people will be able to see the true tradeoffs in POS systems and appreciate the pure power of POW. Which in turn will bring all the more attention to Bitcoin & drive the prices to unforeseen levels.

Time will tell.

But until then, stack those sats! (NFA)

Thank you for reading

May you Live Long and Prosper 🥂

#bitcoin#btc#proof of stake#proof of work