Proof of work has proven effective ever since the network was launched just over 10 years ago. Complex systems are nearly impossible to get right, so I strongly appreciate things that seem to “just work,” even despite some flaws. I also think proof of work is the strongest possible mechanism for censorship resistance making it worthwhile on those grounds alone. However, proof of stake has some advantages too and I think both are important.

Centralizing Forces

One of the properties that seems important to proof of work is that the system requires you to spend an external resource (money and/or electricity) to acquire the asset (Bitcoin). At first glance, proof of stake appears to lose this property, since the money locked up in proof of stake is denominated in the asset, there appears to be a spending the asset to acquire more of the asset which leads to a superficial “the rich get richer” criticism.

People will use this to attack proof of stake as “the rich get richer” but proof of work is actually more centralizing in key ways. Relying on the power grid lends itself to traditional political privilege. Russian gangsters in Kazakhstan who can bribe government officials perform very well under these conditions. It also opens them up to risks. In some parts of the world, miners are detected by their energy footprint, singled out, and thwarted or have their equipment seized.

The ability to acquire state of the art hardware, manage computers in a gigantic warehouse, and purchase electricity competitively all lend themselves to economies of scale. While it’s true that large stakers in proof of stake earn more than smaller stakers in absolute terms, they both earn the same in relative terms which is the fairest possible distribution. In proof of work, your advantage compounds.

Failure Mode

Another key issue is what happens in the event of a significant chain split, like if an attacker has acquired too much hashpower or stake and has effectively compromised the network. In proof of work, your recourse is to change the mining algorithm to render the attacker’s miners useless. However this also bricks all the “good” miners as well. You then need to bootstrap the mining network and infrastructure again from scratch. How many times can you do this before the network is effectively dead? In proof of stake, you can fork the chain and render all the attacker’s capital useless without nuking the other good faith actors. It would still be a complete mess but I think you can make the case that the failure state for proof of stake is actually more sound.

Censorship Resistance

The place where proof of work shines is censorship resistance. Nobody knows where the next block is coming from and the validator set is truly open and permissionless. In all the implementations of proof of stake I am aware of, the validator set is either fixed or known some time in advance. In theory this means you can track down these entities and put pressure on them. Theoretically you only need 1 “free” validator to process any and all transactions to maintain censorship resistance but it’s unclear if this is something you can rely on. However, I do worry that proof of work being tied to the energy grid gives governments the ability and possibly the mandate to go after miners if they wanted to.

Usability

The biggest usability issue with proof of work are slow an variable blocktimes. The block times in Bitcoin are 10 minutes on average but in practice can take much longer than that. In fact, due to a mathematical paradox around Poisson processes, you are more likely to be stuck waiting for a slow block than a long block. Being slow is actually less of a problem than being unreliable. It simply jams up many practical use cases. Proof of stake has precise, regular blocktimes that are simply better suited for actually using the thing. For a user that doesn’t care about censorship resistance or technical fundamentals the proof of stake system is obviously better.

Verdict

We need to fight to keep proof of stake censorship resistant and we need to defend proof of work from political interference at the power grid chokepoint. The technical choices are just as important as the social layer through which we defend these systems. Ultimately they are both means to an end and they are complementary forces in ushering in the new financial system.