Without intimate technical knowledge and access to the latest research on the competing Bitcoin protocols, it is likely that regardless of how well-intentioned policymakers are, their pending regulations will lead to stifling blockchain innovation.
The definition detailed by various government bodies including tthe EU MiCA regulation is only correct in describing BTC’s protocol. The mechanism of proof-of-work used in the original bitcoin, and now representative in the BSV proof-of-work protocol, does not compensate in proportion to added computational work.
Rather, the proportion is related to a combination of the amount of energy imputed into solving the puzzle, combined with the amount of computational effort in validating transactions, and this proportion increases as the block subsidy decreases over time.
“At large scale, proof-of-work computation needs to be balanced with the increased validation load. So, the true usage is balanced between multiple aspects of the network. In any network including Ethereum and BTC you will find that transaction validation is several million times more energy inefficient than hashing. Within BSV, the validation load becomes the energy use, and this remains low compared to existing systems including Visa. The issue is the amount of scale and nothing else.” – Dr Craig Wright, Chief Scientist at nChain
Is proof-of-stake the next best thing?
Due to the false assumption that proof-of-work consensus mechanisms are computationally unscalable and overly energy consumptive, many have sought to find more ‘environmentally friendly’ ledger systems.
Proof-of-stake networks mimic the structure and processes of real blockchains, however at their core, they are only distributed ledger networks – not blockchains by default.
The design includes highly complex mathematical models and algorithms to compensate for the lack of security of the system. This is to hide centralisation and offers very little except marginal security since governance of the system is achieved through ‘staking’ or ‘voting’.
This consensus model facilitates control by ownership to those who hold the ‘majority’ of staked coins, opening the network to sybil attack and subjective decision-making processes.
In proof-of-stake, the concept is to continually bring on new nodes to validate transactions, which over time results in a direct increase of electricity, with no end in sight. Having 50,000 nodes, especially when most of these nodes do not participate to validate transactions or produce blocks, is unnecessary and unsustainable.
To re-emphasise, proof-of-stake hardware that seeks to join the network, will only increase the energy consumption of the ledger by several kilowatt hours, not to mention creating an even larger carbon footprint due to the additional surrounding infrastructure required.
The proof-of-stake argument leans on the misunderstanding that the consumption of power is removed when you take the Proof-of-work out of the equation. Not only is that nonfactual, but if we analysed the full power usage of some of the proof-of-stake protocols, we would see the argument sorely fall apart at the seams.
Security: proof-of-stake vs proof-of-work
At a time when the world is seeking solutions for data integrity and protection from cyber-attacks and data breaches, we simply cannot ignore the scalable blockchain solutions available to us today, nor can we afford to forfeit security and stability for a false sense of sustainability.
Whereas proof-of-stake opens up numerous additional cyber-security attack vectors, proof-of-work perfectly mirrors and improves upon the CIA Triad and NIST Cybersecurity frameworks that guide many companies and government contractors today.
The original Bitcoin protocol was designed to allow individuals to exchange data in an entirely new architecture that provides a firewall between the user’s identity and the transaction.
This removes the need for a trusted third-party authority and empowers users to maintain control over their identity. This significantly increases the cost to cyber-criminals, as they are required to individually attack millions of customers’ networks, instead of targeting one network that exposes millions of customers’ information.
Bitcoin is based on a design that protects the network against bad actors by allowing honest nodes to reject blocks that either attempt to double spend coins or violate the established rules governing the network.
This consensus is enforced through the accumulation of proof-of-work, which allows honest nodes to combine their collective hashpower to fend off would-be attackers. This creates a mathematically infeasible as well as monetarily impractical situation where the attackers must overpower the honest network for an indefinite period of time, as they attempt to maintain a chain of work that includes fraudulent activity.
A framework to review and compare blockchain technologies
y examining only one aspect of the debate, we can see that there exists a lack of objectivity, scarcity of updated information, and a limited supply of technical expertise surrounding the differences between cryptocurrencies and blockchain, Proof-of-work and proof-of-stake, and how these different consensus models differ when applied to both short term and long-term energy utilization, as well as the impact on global information security.
Beyond the booming crypto-casino tokens and artistic NFT’s that currently have most people’s attention – including regulators, remains the need for a technological advance to provide next-generation data security as we transition into a global data powered economy.
As more government agencies begin to investigate these technologies, such as the United States has recently embarked upon, I strongly believe that they must strive to synchronize their National Strategic Review Approach with a focus on security, stability, and sustainability.
This requires a framework to identify the interrelationships and understand the whole and the parts of the systems at the same time.
By using a balanced, unified, and standardized approach to review and compare blockchain technologies, I am confident that policymakers will find it entirely unnecessary to forfeit the future security of a nation’s network as well as financial and data infrastructure by seeking less secure models of consensus mechanisms than proof-of-work.
It is a matter of national and public interest to assure that stable, secure, and sustainable blockchain technology has the unobstructed lane to meet its inherent design to scale and handle the world’s data and financial growing needs, improving beyond the capabilities of today’s limited digital infrastructure.
