Questions have been asked on why it demands so much energy to mine bitcoins. This was the subject of discussion by a panel at the Oslo Freedom Forum. The conference which was held from May 23-25 brought together industry leaders and enthusiasts.
The May 25 discussion centered on why Bitcoin is stuck with the proof-of-work consensus protocol instead of proof-of-stake which is considered far less energy demanding. This is the easiest explanation of PoW vs PoS consensus protocols.
The First System Not Run By Stakeholders
Darin Feinstein, the founder and Chief Executive Officer (CEO) of Corescientific, said that proof-of-work differs from every other system that humans have operated with. According to him, it is the first system in the history of mankind that is not run by stakeholders.
It is effectively a self-run system that doesn’t give the operators the capacity to intervene or decide who can participate and who cannot. This makes it impossible for this network to be disrupted by those running it. Neither does any party have the ability to shut it down.
Feinstein said that it differs from the legacy system because it incorporates the triple entry ledger system instead of the traditional double entry. This enables the ledger to self-audit without the need for a third-party involvement. He maintained that this is the best book-keeping system that has been developed by humans.
“Bitcoin created a triple-entry [ledger] from the old double-entry [ledger] and the ledger self-audits and writes on-chain. It’s an immutable ledger entry that can never be altered.”
Energy Makes The Difference
On her part, Lyn Alden, the founder and CEO of Lyn Alden Investment Strategy, said that energy is an integral part of the system that runs Bitcoin. She said that the high energy demand for the Bitcoin network is essential in the elimination of human involvement. She said that without the energy, Bitcoin operation won’t be different from the legacy system that humans have operated since time immemorial.
“Basically, PoS relies on circular logic, where the largest coin holders determine the state of the ledger and the state of the ledger determines who the largest coin holders are,” Alden said.
She likened Bitcoin without the energy as an airplane without flight.
Another panelist, Nic Carter, said that what proof-of-work does is come about consensus in a manner that makes it easy for everyone to come to an agreement irrespective of who they are. He said that, with proof-of-stake, what happened is that people actually have different levels of authority that determine consensus.
“PoW allows everyone to decide on the correct ledger state with no human oversight or governance.”