A Summary of “Why Proof of Stake” by Vitalik Buterin

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A Summary of “Why Proof of Stake” by Vitalik Buterin

This is my attempt to summarize a recent blog post by Vitalik Buterin. This is a learning exercise for myself and critiques are welcome. If you feel something can be summarized better, please comment.

Link to the article – November 2020

3 Reasons by Proof of Stake is better for blockchain security than Proof of Work

1) More Security for the same cost

  • Compare how much it costs to attack a network per $1 per day in block rewards
  • GPU-based PoW
    • GPUs can be rented or bought, so the cost of attacking a network is the cost of renting or buying enough GPUs to outrun existing miners.
    • This is the cheapest network to attack.
  • ASIC-based PoW
    • Like GPUs, the cost of attacking the network is the cost of buying and running an ASIC. If a 51% attack occurs and the consensus is to change the mining algorithm, the ASICs are bricked.
    • ASICs provide more security than GPUs, but at the cost of more centralization due to high cost/access of ASICs in general
    • This is much more expensive to attack than GPU-based
  • Proof of Stake
    • The network is more secure as more coins are deposited
    • Deposited coins do not depreciate like ASICs
    • Participants should be willing to pay much higher capital costs(staking their coins) for the same reward
    • The more coins staked, the harder it is for any one actor/group of actors to garner enough to attack the network
    • This is much more expensive to attack than ASIC-based PoW

2) Attacks are easier to recover from in Proof of Stake

  • If a PoW chain gets 51% attacked, the response has historically been to wait until the attacker gets bored and stops
  • In GPU-based PoW there is no real defense against 51% attacks and a persistent attacker could render the whole chain useless.
  • For ASIC-based PoW, the response to a 51% attack is to change the PoW algorithm, which bricks every ASIC on the network. The good and the bad.
    • This can be done only once until the network becomes GPU-based.
    • If the attacker is motivated enough, they could then attack the network freely
  • Proof of Stake
    • There are built in “slashing” mechanisms
      • If a nefarious actor is detected by the network, their staked coins are cut by a significant portion
      • The community can also coordinate a user-activated soft for (UASF)
      • No hard-fork is required
      • Attacking the chain once will cost a lot and will not come close to destroying the chain
      • Two attacks would cost much more as the attacker would need to buy tokens enough to replace the tokens they lost.
      • It is asymmetric in favor of the network

3) Proof of stake is more decentralized than ASICs

  • GPU-based PoW is pretty decentralized as it is not very hard to get a GPU
  • It is hard(expensive) to get ASICs in the quantity needed to compete with other miners
  • There is the argument that, in Proof of Stake, the richer get richer
    • The counter is that the alternative, ASIC-based PoW, is even more tilted in favor of the rich
    • More people will be able to run an Eth validator than will be able to amass ASICs
    • Proof of stake is more censorship resistant as it cannot be detected based on the amount of heat/electricity being produced by GPUs/ASICs

Possible advantages of Proof of Work

  • Two primary genuine advantages of PoW over PoS
  • PoS is a closed system, leading to higher wealth concentration over the long term
    • It is much easier to delegate validating responsibilities in PoS, as it doesn’t require effort on the individual other than deciding where to stake.
    • The response is that running a validator in Eth2 will not be overly profitable and it becomes less profitable as more validators join
    • It would take a long time for significant concentration(100 years to double) and other things like spending the money, donating to charity, giving to children, will likely take over.
  • PoS requires “weak subjectivity” and PoW doesn’t
    • Weak Subjectivity – the first time a node comes online, the node has to find a third-party source to determine the correct head of the chain. This could be their friend, exchanges, bad actors, etc.
    • The response is that this level of trust is needed anyway. In BTC, for example, we trust the developers to develop.
    • The risks to this seem much less than the rewards that PoS offers in comparison to PoW

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