ETH Professor: “Bitcoin is the Catholic Church of the Crypto World – People Resist Reformations”
The Ethereum cryptosystem recently switched to the more energy-efficient method called Proof of Stake to verify the validity of digital transactions. Bitcoin, the strongest cryptocurrency, still relies on the energy-intensive Proof of Work method. ETH professor Roger Wattenhofer doubts that there will be any new thinking.
After several years of announcements, the Ethereum blockchain has now made the green transition. Why did it take so long?
Roger Wattenhofer: I assume that Ethereum invested a lot in security and tested the code thoroughly before the software update. If something hadn’t worked, it would have been a disaster. Hundreds of billions of francs are tied to Ethereum. And perhaps there were also internal disagreements about exactly how the change should take place. But in principle, the switch from Proof of Work to Proof of Stake is not difficult.
Proof of work vs. proof of effort
With the Proof of Work mechanism, miners attempt to solve a complicated cryptographic task using enormous computing effort. This serves to prove the correctness of a transaction. The method is extremely energy-intensive. This is because many miners are competing and everyone wants to find the solution first. Because the winner receives a financial reward. With Proof of Stake, a lottery determines who will tackle the cryptographic puzzle. It saves a lot of energy.
Is Bitcoin Now Catching Up?
I have my doubts about that. To put it bluntly, I would describe Bitcoin as the Catholic Church of the crypto world. There is a lot of resistance to reform among miners, who have much more power in Bitcoin than in Ethereum. In the community, Proof of Work is considered the purest education and the safest way to conduct crypto transactions. Proof of Stake is considered by many to be too new and undertested, which is nonsense. The method has been widely used and studied in research for years. In the end, it’s a trade-off between the environment and safety.
Is the debate only about increased security?
No, Bitcoin supporters also see the problem with Proof of Stake as the rich getting richer. Because the lots for solving crypto puzzles at Proof of Stake are distributed based on the cryptoassets that a validator owns (validators are the miners in this process, ed note). This means that if someone already has many “ethers”, they automatically receive more coins to confirm transactions. With proof of work, on the other hand, proponents argue, everyone has an equal opportunity to increase wealth. I see it a little differently: if you have a lot of money, you can build big mining operations and get richer and richer through Proof of Work.
Roger Wattenhofer is a professor at ETH Zurich. His research focuses on the theory and practice of distributed systems and networks. He is particularly interested in cryptocurrencies and blockchain technology.
What about the distribution of these two methods in the crypto world?
Now that Ethereum has migrated, Bitcoin is pretty much alone among cryptocurrencies that consider security to be the only thing important and the environment secondary. Apart from Bitcoin and its copies such as Dogecoin, there are practically no more cryptocurrencies based on the Proof of Work process. If these currencies were to convert as well, the crypto energy problem would be practically solved in one fell swoop.
Earlier this year, the European Parliament considered severely restricting proof of work. But it was then rejected. Do you think there should be legal bans?
First, I don’t think a ban in the EU would make much difference. The large amounts of bitcoins are mined elsewhere because electricity is simply too expensive in Europe. The same would apply to a ban in Switzerland. Second, it is very difficult to prove a violation of the ban. If large mining farms are operating somewhere, this can probably be proven due to the huge power consumption. But when individual miners turn on their computers at home to mine, it will hardly be possible to track it. And even if it was possible, the miners would simply migrate to other countries where proof of work is still allowed.
So will Bitcoin remain dirty for the foreseeable future?
I don’t suppose there will be a rethink among bitcoin miners. Because they make really good money from it. But my hope is that Bitcoin will soon become socially ostracized and lose massively in value – and eventually just die. Or better yet, that Bitcoin lives on as a virtual currency on a Proof of Stake platform.