The Green Side Of Bitcoin on Nostr: 🌱The Green Side of Bitcoin 🌎 is a free online eBook resource that gets the ...

🌱The Green Side of Bitcoin 🌎 is a free online eBook resource that gets the facts straight and shows that BTC & Bitcoin Mining is 🌴POSITIVE🌿 for the environment, natural world & humanity! Please share!

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2.8 How Proof of Stake (PoS) is Fiat Re-Incarnate

There are also a growing number of alternative cryptographic blockchain-based systems that use peer-to-peer networks and cryptographic techniques to facilitate financial transactions. It is important to recognise Bitcoin is unique as a decentralized Proof of Work system. So what’s the problem with Proof of Stake?

Proof of stake (PoS) is a consensus algorithm used by some blockchain networks to validate transactions and add new blocks to the chain – the most recognised projects being Ethereum, Binance & Polkadot. In a PoS system, validators (also known as “stakers”) are chosen to create new blocks based on the amount of cryptocurrency that they hold and are willing to “stake” as collateral. This is in contrast to proof of work (PoW) systems, like Bitcoin, in which validators (also known as “miners”) are chosen based on their ability to solve complex mathematical problems – requiring ENERGY expenditure via computer processing power. Herein lies the key point, an impossible amount of energy expenditure is the limiting factor in obtaining centralized control over the network – so no trust is required from a centralized authority (the monetary protocol and a fixed supply is maintained)

PoS is essentially a form of fiat currency, meaning it has value only because people believe it has value and agree to use it as a medium of exchange. PoS relies on the belief that the cryptocurrency being staked has value, and that this value will be maintained or even increase over time. This belief is similar to the belief that underlies fiat currencies, which are not backed by any physical commodity and rely on the belief that they will retain their value in order to function as a medium of exchange. Furthermore, PoS systems can lead to centralization of the network, as the validators with the most stake (i.e. the largest amount of cryptocurrency) are more likely to be chosen to create new blocks and earn rewards. This can create a power imbalance, as a small group of wealthy stakeholders can effectively control the network. Interestingly, the marketing hype around the power of decentralization in PoS systems is somewhat misguided, for example, to access these projects, users have to visit webpages hosted by a CENTRALIZED Amazon Web Services, wallet addresses can be blocked, transactions frozen, addresses tracked, etc etc.

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