The risk of corporate monopolization is extreme in proof-of-stake (PoS)-based systems, as they turn new financial systems into plutocracies, dozens of US companies have warned in a letter to the US agency. environmental protection (Environmental Protection Agency, EPA).
Businesses hit back at congressman’s attack Jared Huffman who recently described Bitcoin (BTC) mining as “poison to our communities”, which contributes to “air, water and noise pollution”. According to the companies, Huffman’s letter to the EPA is “based on several misperceptions regarding Bitcoin and digital asset mining, which have already been debunked or confuse mining with other industries.”
The two largest crypto-assets by market capitalization – Bitcoin (BTC) and Ethereum (ETH) – currently use the proof-of-work (PoW) consensus mechanism, but ETH plans to switch to PoS soon.
If the letter was signed by multiple bitcoin mining companies such as Core Scientific, Argo Blockchain, FoundryDigital and others, including one of the largest BTC holders, MicroStrategy, other major players in the crypto industry have also signed the letter. The list includes in particular Digital Currency Group, Galaxy Digital, Grayscale Investments, SBI Crypto and bitgo.
In his letter, Huffman writes that “less energy-intensive mining technologies, such as PoS, are available and have a 99.99% lower energy demand than PoW to validate transactions.”
However, according to crypto industry players, the reason why PoS is not suitable as an alternative to the PoW-based bitcoin mining process is that it tends to cause power to accumulate over the cryptocurrency. network in a reduced number of hands. Many cryptocurrency owners choose to store their assets with large custodians, which inevitably leads to risk and centralization in a PoS system, according to the letter.
“[…] in practice, these intermediaries tend to hoard most of the supply,” the letter says, adding that increasing regulations are making it ever more difficult for new custodians to enter the market, leading to further consolidation of the market. sector.
“Thus, the risk of corporate takeover is extreme in proof-of-stake systems,” the letter says, citing the takeover of STEEM by STEEM as an example. Justin Sunfounder of Tron (TRX).
“Put simply, proof-of-stake turns these new financial systems into plutocracies — an outcome inconsistent with tools that are meant to be decentralized, global, and completely devoid of political barriers to entry,” the letter reads, before going on. add :
“Since Bitcoin was created specifically to disempower intermediaries, it is imperative that it remains on proof of work.”
According to the letter, since PoS and PoW are qualitatively different, it is misleading to refer to PoS as a more “efficient” form of PoW, since it does not achieve the same result.
“A bicycle uses less energy than an airplane, but it does something different, and therefore cannot be considered more efficient,” they wrote, noting that PoS does not, for example, allow achieve decentralized distribution of a digital asset, as PoW does.
Additionally, according to the letter, PoS should be understood as an industry term for a shareholder-governed financial consortium.
“In contemporary PoS systems, it is the largest token holders who ultimately determine corporate governance, even if this is not explicitly encoded in the protocol,” the authors write.
However, the Ethereum community has dismissed similar claims in the past.
For example, during an interview with Cryptonews.com, Marius van der Wijdendeveloper of Ethereum, said the community is doing everything they can to keep the PoS implementation on Ethereum decentralized, secure, and fair for all users.
“There is an argument that in PoS only ‘the rich get richer’, but I would say that is even more true in PoW because mining companies can take advantage of their economy of scale much better than not. any miner at home,” according to van der Wijden.
At the same time, the letter from major crypto players worked to systematically counter each of the many points raised in the Congressional letter, including accusations of “environmental and pollution risks” from mining, the reopening of coal facilities and gas shut down by miners and misrepresentation of the power consumption of a single bitcoin transaction.
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