Mar 18, 2022 • 6M

Letter #95: A Nightmare Scenario for Proof of Stake

Read now to learn how Proof of Stake's weakness in the face of a government onslaught may prove to be its undoing.

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Dear Readers,

We spoke a couple weeks ago about a hypothetical government attack on Bitcoin written by someone with extensive experience in Bitcoin mining. He hypothesized whether governments could coopt sufficiently large portions of Bitcoin’s hashrate, in the form of industrial-size mining outfits, to drive useability and user trust on the network into the ground. My rebuttal of his article demonstrated that the Bitcoin blockchain is far more robust than we even realize, and I stand by my assessment that the Bitcoin blockchain is well-positioned to withstand coordinated government attacks on miners.

That discussion led me to muse on whether other blockchains, in particular those that don’t rely on the Proof of Work (PoW) consensus mechanism like Bitcoin does, are as resistant to government attacks against their own processing power.

What better place to start than by addressing the elephant in the room: Proof of Stake (PoS). Outsiders and altcoiners alike have attacked Bitcoin’s energy usage for years, and the European Union went so far as to try to ban PoW cryptocurrencies outright earlier this week. Those same critics have proposed that Bitcoin move to PoS in order to address what they believe is an unsustainable environmental footprint. Their chorus has only grown as developers on Ethereum, the second-largest cryptocurrency by market cap, have signaled their intent to eventually migrate off of PoW and onto PoS.

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