No, Bitcoin Will Not Move To Proof-of-Stake
Four reasons why this is highly unlikely
You have most likely read or heard about the upcoming Ethereum network complete transition from proof-of-work (PoW) to proof-of-stake (PoS) as per the Ethereum Merge.
In conjunction with the hype surrounding this is the question posed by specific media sources:
“Will Bitcoin shift from PoW to PoS?”
In this piece, I will cover why I highly doubt this will occur.
1) Bitcoin and immutability
Firstly, what is meant by immutability in this context? It refers to not being able to amend or tamper with any existing data on a blockchain; these information records are permanent.
Bitcoin achieves this by simultaneously having identical records across multiple computers worldwide(distributed-ledger technology), not to mention timestamping on its blockchain.
The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.
(Satoshi Nakamoto [Bitcoin white paper] 2008).
Even if ‘redoing the proof-of-work’ were to involve maintaining mining (i.e., keeping a form of PoW), I still envisage challenges to this, particularly with over 13 years of data on a blockchain operating 24/7/365 across the entire globe.
Now imagine the insane challenge of shifting this gargantuan amount of data from the current chain to a new one that operates on PoS.
For comparison, Ethereum developers and other stakeholders have been discussing The Merge for several years now, and it still hasn’t occurred, albeit finally scheduled for a mid-September launch. Its blockchain launched back in 2015; Bitcoin began back in 2009.
Words cannot describe how much more complex it will be to deploy a fundamental change to an entire system initially designed tobe immutable. I say this from a layperson’s perspective, though I am sure a blockchain expert would share a similar sentiment, at least with Bitcoin.
Whilst making this switch from PoW to PoS could (theoretically) be done, it would be challenging and perhaps unfeasible, not to mention unpalatable for miners involved in the space.
2) It would significantly devalue Bitcoin mining equipment
To obtain new BTC, miners need to utilise application-specific integrated circuit (ASIC) miners: highly specialised machinery to deal with complex calculations and the enormous hash-rate requirements for mining the foundation crypto.
In a similar issue for Ethereum, there are limited (feasible) alternatives for Bitcoin miners in mining other digital assets. ASIC miners are designed to focus on one type of hashing algorithm, so it is not just switching from one PoW asset to another.
In the case of Bitcoin, it is SHA-256. The plausible primary alternative isBitcoin Cash (BCH), though its blockchain has pros and cons. I question how profitable and practical it would be for a massive influx of Bitcoin miners onto other blockchains that use SHA-256 coins and for various lesser-known coins.
Sources: BTC logo by Simon via Pixabay; BCH logo by Amaury Sechet, CC0, via Wikimedia Commons.
3) Getting majority support for this move
For this idea to be even remotely successful, you would need agreement from at least half of the network’s stakeholders to approve a monumental alteration to its ecosystem.
Considering that miners would not be pleased with this move, particularly those who have invested hundreds of thousands, if not millions, of dollars into mining farms, it would be a tough sell from the outset.
Nonetheless, all eyes will be on Ethereum’s Merge and what transpires after the event, as ETH is the closest crypto to BTC in terms of global scope and market cap. The Merge also has associated concerns, associated with it, including the risk of another Ethereum hard fork.
Significant instability on Ethereum’s blockchain post-Merge will further dampen (at the very least, delay any potential) hopes of any potential PoW à PoS migration for Bitcoin.
4) Using cleaner sources of energy to produce and power mining equipment
Besides the colossal energy requirements of bitcoin mining and transaction in general, coupled with the electronic waste I touched on earlier, we have established that the Bitcoin network’s offers robust security through its total hash rate.
This, in turn, influences its capacity to combat a 51% attack. A frequently quoted source illustrates the costs of such attacks on various blockchains.
A key solution to helping decarbonise Bitcoin is the significant uptake of renewable energy or nuclear power (a touchy subject for some, I know). Besides this, we must find clever ways to utilise more waste heat released from equipment.
In response to this, miners are adopting innovative strategies to put this energy to good use, notably in cooler climates. However, more significant action needs to be takento utilise these resources better to render bitcoin a genuinely eco-friendly digital asset; effectively managing and minimising related e-waste is also paramount.
As Bitcoin’s network is forecast to grow, its hash rate will also increase to maintain its stability. This (with current technology) would increase the general energy intensity of mining equipment unless major power efficiencies are incorporated into newer machines.
Moreover, I believe it would be more practical and sensible to find ways to correctly solve the abovementioned environmental issues than to overhaul Bitcoin’s consensus algorithm completely.
Not only would it cause relatively fewer interruptions to the network, but it would also most likely becheaper and less divisive to do so.
Bitcoin’s energy intensity seems to be the main issue amongst the general public for its use of PoW. It functions and has stood the test of time since its beginnings in 2009.
If staking were to replace mining on Bitcoin, with few coins available for mining and the unlikelihood that another Bitcoin fork would remain viable to maintain PoW, it would inevitably lead to two scenarios: repurpose ASIC miners in some way, or discard them.
One cannot imagine how much related electronic waste this would generate, especially when you factor in the equipment being thrown away.
Concluding thoughts
The last thing I want to witness is Bitcoin being undermined due to an ill-conceived attempt to alter the chain’s consensus algorithm.
The entire crypto space needs more unity, not greater in-fighting, particularly at a time with massive potential for trillions of dollars to flow into the space via institutional investors.
More emphasis should be placed on resolving the abovementioned issues raised throughout this piece before fundamentally affecting Bitcoin’s blockchain. There will be challenges either way, but the longer Bitcoin retains the status quo, the more complex it will be to shift from PoW to PoS.
Yes, Bitcoin is relatively slow (compared to other digital assets), particularly for industrial-grade use cases. However, the Lightning Network or a similar layer-2 scaling solution will eventually be fully operational on Bitcoin’s blockchain, overcoming this issue. I believe it will be a matter of when not if.
There is some decentralisation of the network, though it should be more than what we have, as BTC mining is still too concentrated. Still, every pool has somethingclose to a majority right now.
Fortunately, China’s crypto ban helped break its former dominance of total mining capacity, but more needs to be done to regard Bitcoin as properly decentralised.
To summarise, I doubt Bitcoin stakeholders will decide to ditch PoW due to the following:
— Maintaining immutability on its blockchain;
— Not adversely affecting Bitcoin miners (though I realise this is a contentious view);
— The sheer challenge of seeking at least 50% overall support from Bitcoin stakeholders;
— Overhauling the energy system used to power Bitcoin miners in favour of much cleaner power sources.
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