So basically I am not really sure whether I want to write this piece, but I will try to write it anyway.
I don’t know whether I already mentioned Ben Laurie’s view against Bitcoin mining in one of his writings (Laurie is one of the founders of Apache Foundation). The main idea of the paper is a criticism over the inefficiency of Bitcoin mining, where the miners spend a huge amount of electricity. It is getting more insane since Bitcoin mining facilities all around the world nowadays consume energy as much as Slovakia and Morocco, putting them into the 61st position on the list. This huge energy consumption is solely used to “win new blocks” in mining activities as a form of consensus. The Bitcoin protocol says that whoever can solve the requirements set by the system, she can claim the reward: 12.5 XBT (more than AU$300,000 as per today’s value) per block won at the moment.
Proof of work (PoW), the early consensus protocol implemented in Bitcoin, flawed in terms of its excessive electricity consumption. When this gigantic energy consumption is important to protect the information from tampering and reorganization, it is considered as an unnecessary consumption when in the poor areas of the world, people struggle for electricity in their daily life. Not mentioning that this consumption will have an impact on global warming.
With the inefficiency of PoW, people have started to switch to Proof of Stake (PoS), a consensus protocol originally proposed by Sunny King from Peercoin. In this consensus, instead of using computing power to reach the consensus over new information embedded in the existing chain, PoS determines the consensus by calculating the number of stakes put when creating new blocks. Similar to how the banks work, you will get an interest for every coin you stake. But then it may create a bigger problem where people do not use their coins. Instead, they stake it to get more coins. At the end of the day, nobody is using the coin as a payment system which jeopardizes the economy.
We need to realize that reaching consensus in an open system like cryptocurrency is not an easy task. There are several other consensus protocols being developed, such as proof of elapses time (using a special processor by Intel), proof of space (for coins selling online space), and many more proofs in which they may take time to determine whether they are worthy to replace the PoW and PoS.
Then, as new coins are offered to the public, some of these coins offer a degree of centralized consensus, combined with the spirit of decentralization, for instance, delegated proof of stake or master node protocol. Instead of allowing everyone to jump in the consensus mechanism, they put a high barrier (most of the time they require a significant ownership of their own token) for everyone to start mining. Isn’t it a kind of centralization? Somehow it fulfils Laurie’s prophecy stating that “decentralised currencies are probably impossible”. There is some degree of possibility there, but it might be hard to achieve.
We really need to understand the hardness of this decentralisation and really consider if centralisation is not that bad. Its efficiency might supersede the bad things following it, and it might explain why we have central authorities (some with degrees of more decentralisation scheme in them) all around the world. When we already have an effective central authority system, then why bother trying to create a decentralised one, I wonder? Would that be like trying to reinvent the wheel from scratch and realise that the round shape is the best wheel we can have?
At the end of the day, the coin owners do not really care about how the consensus is reached in the system, as long as the price increases in the daily basis!
What do you think? Write your comments below.