Proof-of-Stake Keeps ‘Value Within the System,’ Says Cornell Professor

How blockchain networks achieve consensus goes at the heart of what the cryptocurrency industry is all about. For some, proof-of-work systems which ‘mine’ to confirm transactions on the network have proven to be the most reliable. However, the industry remains split on the question. Arthur Breitman shared his thoughts on the question in a recent tweet, arguing that transaction fees that go to miners do not reduce inflation nor do these miners have any ‘skin in the game.’ Conversely, when fees go to stakers in a PoS system, real inflation is ‘effectively lowered.’

An important difference between PoW and PoS is that, in the former, transaction fees accrue to the hashpower of the network, with no corresponding reduction in inflation, whereas in the latter it acrues to stakers, which effectively lowers real inflation.

— Arthur B. 🌮 (@ArthurB) September 15, 2019

Going off on Breitman’s thoughts, Cornell Professor Emin Gün Sirer weighed in on the question as well. In his view, what makes PoS superior is that it “keeps value within the system.” PoW systems, on the other hand, leaks this same value to miners and those that control their power.

Indeed, well-designed PoS systems keep value within the system. PoW leaks it out to the miners and the power companies. https://t.co/WZCcXCyZZw

— Emin Gün Sirer (@el33th4xor) September 16, 2019

Still, though, the point has to be made that this is only true to an extent. Bitcoin has a defined limit of coins which it can ever have in circulation. Ethereum, which aspires to someday be a proof-of-stake system, does not have any hard cap and could virtually continue to create ETH indefinitely. How this will impact each network’s internal economy is still difficult to assess given that it’s largely hypothetical. Since there has not been a truly successful network on a PoS consensus model yet, this question will likely continue to split the cryptocurrency industry for some time. Where do you stand on this issue? What advantages does a PoW consensus model have over PoS or vice-versa? Let us know your thoughts below.

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