The evolution of political and economic systems has been highly centralized with power, wealth and status concentrated in the hands of few. Our systems have moved from tribal, to imperial, dictatorships, capitalist democracies, socialism and communism.
Despite this evolution, power, wealth and status has remained stubbornly in the hands of a few with the trend consolidating in recent years.
The ideals of decentralized economies such as the ones envisaged by the Bitcoin founders were to distribute power and the mechanism of wealth across the entire platform and not in the hands of a few, so that nobody would be too big to fail.
These lofty ideals were undermined by the creation of centralized “Miners” who took advantage of the vulnerabilities in the system to again concrete and centralize power into the hands of a few with the wealth to exploit this flaw in the system.
The current system is vulnerable and the accumulated wisdom of platform designers has proposed Proof of Stake as the solution. So let’s review their arguement.
The main reasons given for the transition from Proof of Work (PoW) to Proof of Stake (PoS) is that,
Proof of Work requires vast amounts of computer power consuming vast amounts of energy and that this is unsustainable as it increases the price of electricity and contributes to carbon emissions and global warming.
Proof of Stake ‘forgers” unlike Proof of Work “Miners” are required to have skin in the game, i.e. hold crypto currency not just create and sell it
Proof of Stake systems are intrinsically safer as network attacks are more expensive to mount, where a hacker theoretically is required to purchase 51% of the total number of coins. In the event that a bad actor does succeed in holding 51% of the currency, any negative action would immediately devalue their stake. Whilst this may seem to be a failsafe, given the significant market capitalization it may take some time for the market to fully adjust with the resultant damage succeeding.
These arguments appear valid, and put a good case forward for considering a change in type of algorithm which underpins some crypto currency economies. Whether some of these issues with the Proof of Work model could be solved with other measures is open for debate, and given that the current system has under pinned the existing crypto currencies for many years warrants further analysis and public debate.
In the rationale given for the change to Proof of Stake I see no mention of the need to address the drift of currency ownership into a centralized model.
I see no arguments given that this change will address centralization of power and wealth within the system. In fact it will perpetuate the system, the more stake you have i.e. the wealthier you are, the more you are likely to consolidate or progress your position in the new system. Conversely if you have nothing now you will have no way to make anything in the future, i.e. an analogy can be drawn with an aristocratic feudalism system where only the elite own land and are the only ones with the ability to produce wealth from their stake. So the question remains, is this really a step forward in evolution or a step back and de-evolution?