Nothing is cheaper than Proof-of-Work Consensus – Bitcoin Magazine
This is a transcribed excerpt of the “Bitcoin Magazine Podcast”, hosted by P and Q. In this episode, they are joined by Paul Sztorc to explain why all roads lead to proof-of-work and how proof-of-stake protocols lie itself by believing that proof-of-stake technology can remain decentralized and secure.
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P: Start by defining at a high level what we mean when we say proof-of-work versus proof-of-effort. How would you define proof-of-work and how would you define proof-of-effort?
Paul Sztorc: That’s fine because that’s the point of my article. Proof of work is that you do this one type of calculation over and over again. So your computer is working very hard. There’s no other way to do it, it’s just based on quantity. How many times can you do this SHA256 hash? You do it very quickly, and every other week the bottom performers get fired. So basically, since you’re just doing a lot of math, it comes down to the electricity you’re using, the money you’re spending on hardware, physical chips, the money you’re pumping in to cool the chips, and it’s basically like running your computer, getting you computer to work very hard.
This doesn’t happen much anymore, but in the old days you used your computer and it would just make little noises, but if you started a game – something intensive – the fan would go crazy and it would start making more noise because the computer is working very hard. So that’s the job; the poor computer is working very hard instead of doing nothing or only working when you tell it to. It’s 100% going to try to just churn out as much as possible.
In proof-of-stake, the idea is in the reality of the cryptosystem, in the reality of the blockchain or in the reality of the coin, in that reality of the entire node software, it somehow knows – which is part of the problem, this somehow way – but it knows who has which coins, and it also knows who is betting which coins. These people put the coins in a kind of dangerous condition, a dangerous box. They bet the coins. They say, “I buy in” with a certain amount, and then they join this – what would be – class of miners in their world.
They have a certain amount of coins bet, and then there is a complicated lottery system. There are many variations, but generally speaking, the more money you bet, the more likely you are to be selected. Once selected, you have the option to create the next block and then create the reward because you get a shot at the $10 billion.
