A Summary of “Why Proof of Stake” by Vitalik Buterin

This is my attempt to summarize a recent blog post by Vitalik Buterin. This is a learning exercise for myself and critiques are welcome. If you feel something can be summarized better, please comment.

Link to the article – November 2020

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3 Reasons by Proof of Stake is better for blockchain security than Proof of Work

1) More Security for the same cost

Compare how much it costs to attack a network per $1 per day in block rewards
GPU-based PoW
GPUs can be rented or bought, so the cost of attacking a network is the cost of renting or buying enough GPUs to outrun existing miners. This is the cheapest network to attack.

ASIC-based PoW
Like GPUs, the cost of attacking the network is the cost of buying and running an ASIC. If a 51% attack occurs and the consensus is to change the mining algorithm, the ASICs are bricked. ASICs provide more security than GPUs, but at the cost of more centralization due to high cost/access of ASICs in general This is much more expensive to attack than GPU-based

Proof of Stake
The network is more secure as more coins are deposited Deposited coins do not depreciate like ASICs Participants should be willing to pay much higher capital costs(staking their coins) for the same reward The more coins staked, the harder it is for any one actor/group of actors to garner enough to attack the network This is much more expensive to attack than ASIC-based PoW

2) Attacks are easier to recover from in Proof of Stake

If a PoW chain gets 51% attacked, the response has historically been to wait until the attacker gets bored and stops In GPU-based PoW there is no real defense against 51% attacks and a persistent attacker could render the whole chain useless. For ASIC-based PoW, the response to a 51% attack is to change the PoW algorithm, which bricks every ASIC on the network. The good and the bad.
This can be done only once until the network becomes GPU-based. If the attacker is motivated enough, they could then attack the network freely
Proof of Stake
There are built in “slashing” mechanisms
If a nefarious actor is detected by the network, their staked coins are cut by a significant portion The community can also coordinate a user-activated soft for (UASF) No hard-fork is required Attacking the chain once will cost a lot and will not come close to destroying the chain Two attacks would cost much more as the attacker would need to buy tokens enough to replace the tokens they lost. It is asymmetric in favor of the network

3) Proof of stake is more decentralized than ASICs

GPU-based PoW is pretty decentralized as it is not very hard to get a GPU It is hard(expensive) to get ASICs in the quantity needed to compete with other miners There is the argument that, in Proof of Stake, the richer get richer
The counter is that the alternative, ASIC-based PoW, is even more tilted in favor of the rich More people will be able to run an Eth validator than will be able to amass ASICs Proof of stake is more censorship resistant as it cannot be detected based on the amount of heat/electricity being produced by GPUs/ASICs

Possible advantages of Proof of Work

Two primary genuine advantages of PoW over PoS
PoS is a closed system, leading to higher wealth concentration over the long term
It is much easier to delegate validating responsibilities in PoS, as it doesn’t require effort on the individual other than deciding where to stake. The response is that running a validator in Eth2 will not be overly profitable and it becomes less profitable as more validators join It would take a long time for significant concentration(100 years to double) and other things like spending the money, donating to charity, giving to children, will likely take over.

PoS requires “weak subjectivity” and PoW doesn’t

Weak Subjectivity – the first time a node comes online, the node has to find a third-party source to determine the correct head of the chain. This could be their friend, exchanges, bad actors, etc. The response is that this level of trust is needed anyway. In BTC, for example, we trust the developers to develop. The risks to this seem much less than the rewards that PoS offers in comparison to PoW