Ripple Chair Chris Larsen proposes letting Bitcoin work with the same or better incentives for miners while phasing out of the Proof of Work consensus. However, what means of Proof of Work, and how does energy consumption contribute to climate change?
Reason to Move Away PoW
The argument is that the climate crisis is worsening, and Bitcoin mining is a big contributing factor. Chris Larson believes in a better low energy consensus algorithm to help Bitcoin reduce its energy consumption. Such as the Proof of Stake consensus, which Ethereum is trying to adopt.
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Calm Unhappy Miners
He further pointed out that if miners can receive the same or better incentives, they will be happy to adopt the low-energy cost consensus algorithm. The mining pool will become a reward pool without energy consumption while handing out rewards.
The Problem of Rewarding Pool
Such a rewarding pool creates a monopoly that detaches from the economic competition. PoW rewards companies to continue seeking low-cost energy to mine more efficiently and effectively. The pool will reduce competition and make big fish in the pond bigger, while smaller fish have no chance to win the game.
Bitcoin’s Energy Expenditure is Security of Fairness
Energy consumption from Bitcoin mining is to exchange its security of fairness. It is a verification process that needs to be completed before broadcasting public transactions. It is transparent to bring each miner’s work fairly during the competition. It makes every participant in the Bitcoin mining process fair and equal.
Proof of Stake Can Lead to Centralization
Unlike Proof of Work, Proof of Stake can lead to centralization. This is because one can easily dominate in the Proof of Stake consensus without efforts to prove their capability but only accumulate more coins with significant capital to buy out the competition.
Proof of Stake = Cash Printing Press
Proof of Stake does sound attractive in the short term to reduce energy consumption. However, it also discourages the innovation and opportunity-seeking of alternative solutions or technology, making crypto technology obsolete in the long term.
Bitcoin is likely staying in PoW, and there are no perfect solutions on consensus algorithm to make the blockchain fair, transparent and profitable at the same time. Also, Bitcoin is not created to become profitable but to prevent fiat systems from becoming corrupted.