BitcoinTechnology

The Maximalist Case for Why Bitcoin Should Switch to Proof-of-Stake

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Bitcoiners spend a lot of time thinking about how a malicious actor could attack the network. We tend to assume that the adversary is attacking for monetary incentives, but what if the attacker is not economically rational? What if the attacker is not motivated by financial gain, but narcissistic tendencies and a bottomless bank account?

That’s how we end up with someone like billionaire Chris Larsen. Last month, the Ripple co-founder ponied up a fraction of a percentage of his net worth to fund an advertising campaign against Bitcoin’s proof-of-work mechanism. The ads are clearly not intended for Bitcoin developers, nor even for Elon Musk – they’re for indulging Larsen’s ego. This guy has been irrelevant since XRP crashed a half decade ago, and all of a sudden he’s doing interviews with Anthony Pompliano and Bloomberg Media. Well played.

That said, Bitcoin HODLers should welcome a software modification that changes Bitcoin’s consensus mechanism to proof-of-stake. Several Bitcoin developers have already volunteered to make the requisite change for a lesser amount than Larsen poured into his ad campaign. A hard fork to proof-of-stake obviously would not replace Bitcoin, but function as an airdrop similar to Bitcoin Cash and Bitcoin SV. Airdrops are good for the price of bitcoin, they make number go up just like a stock dividend. We already have Bitcoin Gold and Bitcoin Silver; why not have a new shitcoin called Bitcoin Green? There’s no risk of splitting the network, for XRP shills don’t run nodes.

In coming months, Ethereum will undergo its much-anticipated, much-delayed transition to Proof-of-Stake. There’s no pretense that this would make an ounce of difference in global CO2 emissions. The Ethereum Merge explainer states quite clearly that hashpower is expected to move to alternative shitcoins. Just like how our boycott of Russian oil didn’t stop the flow of oil; it simply meant that China and India got to buy Russian crude for cheaper.

There’s a nonsensical idea that Bitcoin energy usage imposes opportunity costs, as though Bitcoin miners could stop mining and redirect the electricity to illuminate an orphanage. More likely, if Bitcoin mining was banned from the face of the earth, existing miners would instead apply their hashpower to Bitcoin Cash or Dogecoin. After all, they already invested in all those ASICs. In order to reclaim the electricity, you’d need a global ban on hash functions, which effectively becomes a ban on computing in general.

The whole “Change the Code” campaign serves as a reminder that the most dangerous attacks on Bitcoin are not economically rational (footnote). For a brief period in 2018, Chris Larsen was the fifth richest person in the US. Rich people are willing to lose money as long as others lose more. Ideology, self-righteousness, and daddy issues are far more formidable motivators than greed.

Footnote. For example, a minority percentage of Bitcoin hashpower could decide to censor problematic transactions, and additionally orphan any blocks that include those transactions. As long as this censorious minority is willing to forgo transaction fees, other miners may comply with the censorship to avoid their own blocks being orphaned or “cancelled”.

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Dave is a former FX trader who has been trading crypto since 2015. He is long BTC.

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