The Proof of Stake Trojan Horse by@atrigueiro

The Proof of Stake Trojan Horse

Anthony Watson HackerNoon profile picture

Anthony Watson

Coder and the Author of "Cryptocurrency Investing in the Age of Dollar Chaos"

The Proof of Stake versus Proof of Work debate will affect how cryptocurrencies move forward. The meltdown of the global financial systems in 2008-09 prompted "Satoshi Nakomoto" to create a 21st-century version of the old Proof of Work model which was not based on humans' favorite yellow metal, gold. Satoshi created digital gold, and called it Bitcoin.

Gold has been the Proof of Work model for millennia. A currency backed by gold was only possible if the work was done in the mines to dig it out of the ground. Gold was the ultimate Proof of Work. Obtaining gold has never been easy, so if a nation or kingdom had it in great quantities, some work had to be done. A currency backed by gold was not subject to devaluation the way a fiat currency devalues.

Fiat currency is essentially the Proof of Stake model. A currency backed by the "full faith and credit" of a nation or kingdom cannot be the same. Humans always seem to end up using some fiat currency because pushing around wheelbarrows full of gold is not terribly practical. Also, moving one's "treasure" around exposes it to attack and can be dangerous. However, the faith and the credit always seem to run out eventually.

Of course, a nation has a "stake" in its currency's value. The devaluation of their fiat currency can have very bad consequences. For years perhaps decades, the nation's treasurer will make sure things are operated in a "responsible" fashion. However, after some amount of time, somebody gets greedy among the stakeholders then meltdowns like we saw in 2008-09, brings everyone back to the yellow metal.

Bitcoin and Ethereum cryptocurrencies have been around for a long time now. Mainstream money has been very slow to recognize what cryptocurrency could be. They now want in but the Proof of Work model requires, well…work.

Proof of Stake allows the usual suspects to impose their old regime by simply buying a place at the table. Proof of Work is a more difficult hill to climb. It is actual work on many different levels to get traction in a Proof of Work ecosystem. Money is looking for an easier way to get a "stake" at the cryptocurrency table.

Proof of Stake is coming in under the guise of being more green which I think is highly debatable. All across this economy, there are dirty power sources. Singling out the competing monetary model cryptocurrency represents seems targeted. The Proof of Stake crowd will go into great detail about how “mining and rewards” work in the Proof of Stake model. They are pointing out all the trees because if you look at the forest, it is hard not to see Proof of Stake as money trying to buy a place at the table.

The Proof of Stake crowd wants to obscure their true intentions by claiming to save the planet. Proof of Work is not just about obtaining the graphics cards or burning a coal furnace to power the mining rig as the Proof of Stake crowd would have us believe. There is a lot of expertise that goes into operating a successful mining operation in the Proof of Work model. There is a lot more work being done to produce a hash rate than just plugging in a computer.

ETH 2.0 seems like a foregone conclusion with over 21 billion dollars staked to the new Ethereum Proof of Stake model. This represents the largest single holder in the Ethereum ecosystem. This is nearly 10% of the ETH circulating which is a lot for sure. However, is ten percent enough remains the big question?

There will be a lot of very angry "stakeholders" if ETH 2.0 does not happen in 2022. Perhaps this is why Vitalik Buterin fled to the Dogecoin Foundation. A more powerful resistance is brewing because there is a greater understanding at all levels that Proof of Work produces a kind of meritocracy while Proof of Stake will always be about the corruption of money not saving the planet.

Disclaimer: The opinions in this article belong to the author alone. Nothing in this article constitutes investment advice. Please conduct your own thorough research before making any investment decisions.

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