Trader University explains the differences between Proof of Work and Proof of Stake. He also clears out some of the FUD, Fear Uncertainty and Doubt spread by people who have something to gain by the propaganda against bitcoin.
In this video, I discuss the tradeoffs between Proof of Work (PoW) and Proof of Stake (PoS), as competing consensus mechanisms.
PoW uses much more energy than PoS, but then again storing gold at Ft Knox uses a lot more energy than storing it under your bed.
The huge amounts of energy consumed under PoW make Bitcoin secure– it becomes very expensive and difficult to rewrite the tip of the blockchain, much less the whole blockchain. Under PoW, there is no way to cheat– you need to burn the electricity to prove that you’ve done the work.
Proof of work is real work that requires real energy. Proof of stake is just providing a signature.
Further, PoS leads to more and more centralization over time, as the rich get richer. By contrast, PoW incentivizes the search for faster chips and cheaper energy. PoW leads to innovation, while PoS leads to stagnation and centralization.
Under PoS, everyone needs to stake (with its attendant risks of coin loss), or risk getting diluted. Staking income is almost certainly taxable, which means that Ethereum will need to find billions of dollars of new money every year just to allow stakers to sell their ETH for fiat to pay taxes.
In the event of an internet partition, it is very easy to pick the official chain under PoW– it’s just whatever is the longest chain after the partition has been resolved.
Under PoS, there is no objective neutral way to pick the official chain. Probably Vitalik will get to decide. Not investment advice! Consult a financial advisor.
ETH staking: https://ethereum.org/en/eth2/staking/
ETH2 staking is already becoming centralized: https://duneanalytics.com/eliasimos/E…