from r/CryptoCurrency by pixieshit
Let me preface this by saying that I think decentralised finance is one of the greatest inventions in our lifetimes. To think that all the financial empires of the past few millennia struggled to find monetary media and stores of wealth that was incorruptible, salable, resistant to supply manipulation... and the closest that they ever got was gold... I find crypto exciting and the technology beautiful. I can't wait to see it play out over the next decade.
The value of crypto over fiat is decentralisation. Without decentralisation, crypto would be worthless. So any claims that a consensus mechanism is centralised is a cause for discussion.
I have rudimentary knowledge of how Proof-of-Work and Proof-of-Stake works. In PoW, the network is secured by mining power. In PoS, the network is secured by locked validator funds. I cheered on the 2022 ETH PoW -> PoS merge, even baked lil ethereum-shaped cookies for it haha. To me ETH was just being decentralised in another way, because you would see the same dispersion of validators in a PoS system as you would see of miners in a PoW system. Sure, there would still be degrees of centralisation contingent on how some entities could possess more processing power or a larger stake, but this risk exists for both consensus mechanisms.
However I'm reading a book called Broken Money now by Lyn Alden. She's very pro-bitcoin but argues that PoS blockchains are inherently centralising.
The claims I can make out so far:
- PoS requires trust, while BTC/PoW is trustless. She cites both the Solana and BSC blockchain (both PoS) going offline several times during 22-23 (I'm surprised more people aren't concerned about this). Since there is no real-world cost (like committing electricity) to producing new blocks on PoS chains, anyone can create an alternative ledger of false transactions. She argues that the only way to proceed is for major stakers to get into a literal chatroom and decide where to restart a blockchain from - and so systems are dependent on centralised entities, usually those that hold the most wealth.
- The rich get richer faster, and increasingly possess more power in the system. The nature of PoS is that staking more coins increases staking yields, which in turn increases the staked funds. This leads to an exponential increase in the share of the network. Theoretically, over time, power centralises to the wealthiest validators.
- PoS is inherently concentrating, with limited distributive capability. For reasons stated in the dot point above
Could more tech-savvy weigh-in? How legit are these claims? Is the degree of potential centralisation worrying? Or negligible? Serious answers only, leave the shitposts at the door
So far I haven't seen any problems with how Eth is running (I'm so pro-eth it's not funny) but I wonder if these problems are more salient in smaller PoS blockhains.
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