In a recent interview, Ethereum co-founder Vitalik Buterin shared his views on how he would have gone about introducing Bitcoin.
Surprisingly, Buterin said that while Proof-of-Stake (PoS) has its advantages, particularly in terms of environmental impact, he believed Satoshi Nakamoto’s decision to use Proof-of-Work (PoW) at the time was correct.
But why is Buterin saying this, given Ethereum’s difficulty transitioning from a PoW to a PoS blockchain?
The Ethereum 2.0 upgrade poses major technical challenges
One of the significant ongoing developments in the crypto ecosystem is the move from Ethereum to a PoS blockchain. Together with other upgrades, ETH 2.0 will bring more scalability, sustainability and more security.
The path to ETH 2.0 is divided into three main stages. The Beacon Chain, which brings staking and lays the foundation for further development. This went live a year ago, in December 2020.
Then there is the merge, which relates to the merging of the beacon chain with the existing ETH 1.0 chain. The estimated rollout for this is Q1 / Q2 2022. But talk of postponing the difficulty time bomb until May 2022 suggests that this phase may not be on schedule.
The time bomb is a process that gradually complicates PoW mining until Ethereum is unprofitable for mining. Indeed, to let the miners run out.
Finally, there are shard chains, which distribute the network load across 64 new chains to improve scalability and capacity. It is estimated that this will be ready “sometime in 2022”.
This way, it’s a lot more complicated than building a new blockchain from scratch. Running two parallel chains and then merging them presents technical challenges that would not exist if you started with PoS.
Instead of criticizing PoW as a concept, Buterin said it had its place, especially in the early days when cryptocurrency was starting to take off.
In terms of what Buterin would have done if he had created Bitcoin, he describes a timeline that is eerily similar to what Ethereum is doing now.
“I think it probably would have used proof of work for the first five years and proof of deployment after that.”
He added that PoW is a democratic method of token distribution. While ASIC mining may have destroyed this by making bitcoin mining a reserve of well-resourced companies, Buterin points out that in the beginning anyone could mine bitcoin with a CPU. And then later with a GPU.
“The fact that Bitcoin was a proof-of-work in the beginning was very important and good.”
However, as cryptocurrencies are increasingly adopted, PoS makes more sense in the long run.
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