Why does Ethereum plan to move to Proof of Stake?

  • The initial version of Ethereum (Frontier) uses a Proof of Work based consensus algorithm, but I see that there are plans to implement a Proof of Stake based consensus algorithm called "Casper" in a future version of Ethereum. What is the motivation for the move to implement Proof of Stake in Ethereum, when no other major blockchain is currently using this technology?

    Decred is a major blockchain that currently uses PoS.

    Cosmos is another blockchain using PoS (using Tendermint consensus).

  • The fundamental flaw of Proof of Work (PoW) is that the costs of attacking the system are equal to what is spent to run the system. High security thus can only be achieved at high operating costs. The idea is that the honest participants just outspend the dishonest.

    This is already today highly inefficient, but it does work for Bitcoin. As soon as the block subsidiary starts reaching zero, the ratio between the Market Capitalization and the costs of attacking Bitcoin becomes critical. Details are presented here.

    Why Proof of Stake?

    • Costs

    Proof of Stake (PoS) promises to solve this problem. An honest validator is expected to have very low costs, compared to the costs an attacker would incur.

    • Less Censorship

    Another problem Casper tries to solve is to disincentivize censorship. The PoW schema of Bitcoin is, more or less, a zero sum game. This means, if a miner loses a block (it does not get included in the main chain/ it gets censored), all other miners benefit from their loss. PoS for Ethereum will not be a zero sum game but instead a coordination game, where the rewards for everyone are highest, if every participant can include their blocks.

    • Scalability

    Finally some scalability problems can be addressed more easily with PoS.

    Always provide the full form like this, when first introducing an abbreviation: Proof of Work (PoW)

    I don't agree with this statement regarding Proof of Work algorithm "High security thus can only be achieved at high operating costs. The idea is that the honest participants just outspend the dishonest.". In order to compromise PoW you need a group of dishonest participants, that not only outspends honest ones, but also can reach and enforce full cooperation between themselves. This is much more difficult to achieve than just outspend honest ones, if not impossible.

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Content dated before 7/24/2021 11:53 AM