PoW vs. PoS: Which school of thought is right?

PoW vs. PoS: Which school of thought is right? - charles hoskinson 1024x671In one of his famous videos, Charles Hoskinson, CEO of IOHK and inventor of Cardano, spoke of decentralization, referring to the well-known "bitcoin maximalists" Jimmy Song and Tone Vays. Hoskinson started by evaluating Bitcoin's degree of decentralization and identified several problems.

Like in baseball

Jimmy Song, a crypto developer and blockchain expert compares the PoS system with baseball and its points system. Tone Vays says in the interview that “If your hard fork goes smoothly, you are centralized.

If you are planning to decentralize yourself, you will be centralized. And, if your CEO is taking money to save a company that prints his money, well ... "For Song," Proof-of-stake is like a paper vault, it has no security. " It's because stakeholders are the creators of the tokens themselves. He believes that work should be done and energy should be spent on producing cryptocurrencies.

Hoskinson's answer

According to Hoskinson, when the token price increases, the number of participants at the level of staking increases, producing new blocks. He states that PoS is inversely proportional to a path towards decentralization, while PoW leads towards it.

Since 2013, Hoskinson has compiled numerous academic papers citing PoW's disadvantage and its effect on decentralization. He asks Vays and Song to analyze the two systems. The reason for this is the development of ASIC hardware, patents on designs and "economics of scale".

In general, its implications for economies of scale have proven wrong. It is true that it is easier for larger entities to cut costs. However, it is limited to some extent and competition is also important in a free market economy. Furthermore, this applies to all free capital markets. However, there is no reason to dissent from the fact that PoS has many advantages.

A healthy topic

Last but not least, the debates on centralizing pre-mining tokens are not new. In particular, with Ethereum which has gone from PoW to PoS. In PoS, stakeholders are rewarded based on their participation, which could motivate stakeholders to maintain their share rather than distribution.

Hasu, a researcher and developer of cryptocurrencies, claims that over time staking it generates returns and leads to decentralization. In the case of Ethereum - here the quotation in real time -, the network started with 72 million pre-mining ETHs, which now represent 62% of the coins and are periodically shrinking.

In response to this, Nic Carter states that this mechanism works "only if PoW distribution continues. switch to PoS - or start directly with PoS, as many chains do - freezes the current distribution. However, large-scale miners add barriers to entry for new entrants with low-cost electricity and high-end hardware.