Author: Billy Tetrud 2021-05-23 19:10:50
Published on: 2021-05-23T19:10:50+00:00
The discussion about Bitcoin's consensus mechanisms revolves around the comparison between proof of stake (PoS) and proof of work (PoW). It is argued that PoS is not fit for purpose in a Bitcoin-like system since it gives responsibilities to coin holders that they cannot handle. Large unsophisticated coin holders can put their coins in cold storage without considering the health of the underlying ledger, which is different from PoS systems where this clean separation of responsibilities does not exist.It is mentioned that leading PoS protocols such as Cardano and Polkadot could have implications on Bitcoin. Algorand's approach to only allow online stake to participate in the protocol is also discussed. However, none of these solutions seem to address the conflicting requirement that the keys for large amounts of coins should be kept offline but those are exactly the coins needed online to make the scheme secure. Delegation is not allowed since it opens up a new social attack surface and degenerates to Proof-of-SquareSpace. Therefore, for a "digital gold" like system like Bitcoin, simplicity must be optimized, and extraneous responsibilities for the holder of the coin must be avoided.The discussion also highlights the differences between PoS and PoW in terms of security and trustlessness. PoS tends towards oligopolistic control, but this is not the case with any PoS mechanism known. By contrast, PoW has clear centralization pressure, and the goal is to ensure that it remains insignificant. PoW also has more barriers to entry than PoS systems, meaning the tendency towards oligopolistic control is worse for PoW. Regarding energy usage, Bitcoin's current energy usage is warranted, but if there is potential to do better, it should be considered. It is mentioned that PoS is only resilient to 1/3 of the network demonstrating a Byzantine Fault, whereas PoW is resilient up to the 1/2 threshold. However, some PoS designs exceed the 1/3 requirement up to nearly 50%. It is also shown that the best PoW can do is require an attacker to obtain 33% of the hashpower because of the selfish mining attack. Together, both of these things reduce PoW's security by about 83%.Finally, it is argued that PoS requires trade-offs incompatible with Bitcoin's objective to be a trustless digital cash, specifically regarding the "security vs. liveness" guarantee. However, there is no source provided to support this argument. Furthermore, it is noted that gaining tokens without someone choosing to give up those coins is not a practical constraint.In conclusion, while there are advantages and disadvantages to both PoS and PoW consensus mechanisms, the ultimate goal is to ensure the security and trustlessness of Bitcoin as a digital currency.
Updated on: 2023-06-14T20:52:09.013258+00:00