Ethereum co-founder Vitalik Buterin, in an interview with Noah Smith, said that he has two big concerns about Bitcoin.
- Vitalik Buterin says he is “concerned” about the future of Bitcoin
- The co-founder of Ethereum alleges two reasons
- Their criticisms are related to their fees and PoW mining
In an interview today with economics writer Noah Smith, the co-creator of ethereum, Vitalik Buterin said that he is “concerned about Bitcoin for two reasons.”
Smith shared the interview for Twitter to his more than 265 thousand followers:
In this interview, I talk to Vitalik Buterin about proof-of-work vs. proof-of-stake, the recent crash of crypto markets, crypto security, decentralized governance, “start-up companies” and much more.
In this interview, I talked with @VitalikButerin about proof-of-work vs. proof-of-stake, the recent crash in crypto markets, cryptocurrency security, decentralized governance, “startup societies”, and more!
— Noah Smith ???????????? (@Noahpinion) September 2, 2022
Bitcoin problems, according to Vitalik
Buterin explained that he believes that Bitcoin could face problems in the long term future due to its fee model.
Currently, Bitcoin distributes coins to miners as payment for securing the network, but since the protocol has a maximum supply limit of 21 million, eventually the network will rely only on transaction fees for security. Buterin told Smith that this is a problem because Bitcoin “is not succeeding in earning the level of fee income required to secure what could be a multi-million dollar system“.
His concern is supported by some figures. According to data from Crypto Fees,Bitcoin averaged about $225,000 in fees over the past week, behind the pillars of DeFi What Aave Y uniswap. The largest fee generator is the protocol that Buterin created, which raised around $2.7 million during the same time period.
Buterin said he also fears for Bitcoin because “Proof of Work (PoW) provides much less security per dollar spent in transaction fees than Proof of Stake (PoS)”arguing that it would be problematic to have a $5 trillion network that costs only $5 billion to attack.
Likewise, Buterin also pointed out that the removal of Bitcoin of the Work test would “politically unfeasible”.
About The Merge
Regarding the next release of TheMerge, the much-anticipated upgrade that will see the blockchain move from proof-of-work (PoW) to proof-of-stake (PoS), some of the detractors have argued that proof-of-stake limits decentralization and allows larger stakeholders to control the net. However, Buterin told Smith that he thought those arguments were “just wrong”. He said critics have “a misconception that Proof-of-Work and Proof-of-Stake are governance mechanisms, when they are actually consensus mechanisms. All they do is help the network agree on the correct chain. A block that violates the protocol rules (e.g. trying to print more coins than the protocol rules allow) will not be accepted by the network, no matter how many miners or participants support it.”
He also explained that in pow the miners are quite powerless in the governance process. “In PoS, it’s exactly the same; the participants do not choose the rules, they simply execute them and help to order the transactions”.
In other words, the participants can validate transactions, but cannot influence the future design of the network.
He further said:
The early era of highly democratized proof-of-work was a beautiful thing, and helped tremendously in making cryptocurrency ownership more equal, but it is unsustainable and is not coming back.
About the current market
Buterin also shared some rare insights into the crypto market over the past two years, commenting on last year’s bull run that saw the global cryptocurrency market capitalization surpass $3 trillion in November 2021. He admitted he was “ssurprised that the crash hadn’t happened sooner…because manic phases tend to last for a period of a few months before a rapid crash”. While he acknowledged that prices are down across the board in 2022, he said crypto feels “tools” now. This is the full comment:
“We are beginning to understand what both politics and technology will look like in the 21st century, and how each of the pieces we are working on will fit into the picture. In 2022, cryptocurrencies finally feel meaningfully useful; Many major organizations and even governments are using them as a way to send and receive payments, and I suspect other apps are coming soon. The future still feels less uncertain, but we have a much clearer vision than before of how it will all play out.”
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