Georg C. F. Greve

Selling trust to the highest bidder

Accept aristocracy so you don’t have to destroy the environment.

That may seem like an odd sentiment, but is effectively the choice put forward in the debate between Proof of Work and Proof of Stake.

Proof of Work is a concept to allow two or more parties who do not know or trust one another to form a certain amount of trust. Everyone solves the same equation. If everyone arrives at the same result, each party can assume the other parties spent roughly the same amount of effort. In order to be meaningful, the amount of effort spent must be substantial. Proof of Work is the creation of trust by means of turning electricity created at substantial cost to the environment into waste heat. You can think of it as the digital and environmental equivalent of blood brotherhood, where everyone is cutting their arms to extract some blood every couple of seconds.

Many people argue that this price is justified for a truly decentralised, democratised financial system. If it only worked. Because the 2nd law of thermodynamics dictates that Proof of Work must automatically form oligopolies, sometimes even monopolies. Also it makes transactions slow. So slow that it left people desperate for better solutions.

The most popular one is called Proof of Stake. The concept is again simple. If a party tries to cheat in a Proof of Work ecosystem, they stand to lose the effort invested into the calculation. So if it is about having something to lose, why not take the wallet of participants as the basis of trust? Cheat, and you lose your money. The concept seems so compelling that whole networks like Etherium have been working frantically on switching over to Proof of Stake in order to gain transactional capacity.

Proof of Work networks are already governed by oligopolies thanks to an invisible hand worked by the 2nd law of thermodynamics. Switching them to Proof of Stake will cement that status quo. Where the oligopoly was the unintentional, yet inevitable side effect with Proof of Work, it is the official system of governance in Proof of Stake.

Because even when new systems are built on Proof of Stake, the concept dictates that a group of extra wealthy participants can rule the network. Even to the detriment of the vast majority of participants. It’s an aristocracy of those who have the largest wallets. And wallets represent currency. So Proof of Stake essentially turns governance of the network over to the highest bidders.

So there it is. Proof of Stake drops the environmental destruction and pretence of decentralisation at the cost of turning blockchain networks over to the highest bidder. It turns blockchain systems into power amplifiers, much like the Internet itself, to be governed as feudal estates by the future (or present) governments, Microsofts, Googles and Facebooks.

Which is why we are taking a different approach, based on universally acknowledged democratic principles, the same principles that successfully govern Switzerland for centuries.