PoS has become the dominant network consensus mechanism, as Bitcoin is the last to use PoW. It is important for the crypto community to compare the advantages and disadvantages of each protocol. Bitcoin mining pool Poolin halted withdrawals in a liquidity crunch. Let’s take a look at how miners have reacted to this and what ADA holders could do when something similar happened in the Cardano ecosystem.
PoW and the PoS implementation in Cardano are very similar in many ways.
The number of blocks that pools produce is determined by the amount of resources delegates give them.
The Cardano network can limit the size of pools. This supports decentralization. In the Bitcoin network, there is a pool with a 30% hash rate.
The delegates of the hash rate have to trust the pool operators that they will be rewarded. In the Cardano network, the payment of rewards is a fully automated process.
Delegates can choose another Cardano pool to delegate ADA to at any time, just as hash rate delegates do in the case of Bitcoin.
Regardless of the type of resource delegated, be it digital coins or hash rate, the network is controlled by the delegates.
Bitcoin is certainly not the last to use PoW. There are lots of other chains like ergo using POW in innovative ways. Also the problem with a POS network is that if the network is attacked once, it means that the attackers have a majority of the ADA. Therefore once they have the majority of ADA, the network can never be reclaimed. On the other side, with bitcoin even if the attackers become the dominant hashrate provider, there is always a chance of reclaiming the network in the future. Also pools on bitcoin are not the same as pools on cardano. Pools on cardano are natively supported and just like people team up on bitcoin to combine hash power, pools can form alliances with each other to follow similar practices and become one entity, it can also be streamlined with a smart contract which would delegate to any one of this alliance of pools. Therefore, cardano is in no way better in that regard.
I don’t think there is much difference between POW and POS in that regard. In either case if the network gets majority controlled by “bad actors” that deliberately harm it then the value of the network will be significantly destroyed.
The benefit that POS has in this regard is that the attackers will be destroying their own token value since they own the majority of the tokens and there will be no way for them to hedge the downside. Their Ada tokens are only valuable on the very network they are destroying.
On the other hand with POW attackers can attack the network with hashing power and at the same time short the token to profit from its downfall. Later they can even re-purpose their compute power for some other task after they have destroyed the network value. Their hashing power still has value outside of the Bitcoin network.
I agree, but the focus here is on malevolent actors who’s only intention is to derive value not from the value of the tokens but from the lack of a network (read : governments). In that regards, once the cardano network is taken over, its done whereas in POW, there is always space to be able to reclaim the network since the hashing can always be increased.
I see your point but I don’t think it would work out that way.
Bitcoin has value because people believe that it is decentralised and their holdings cannot be devalued through malicious operation of the protocol. If this belief is broken then the network has lost much (most) of its value. It will be a failed experiment then.
I also see your point that a government could attack a POS network like Cardano and disregard financial costs by printing money to purchase tokens.
However, if they did this they would be effectively mounting a speculative attack on their own currency. Furthermore, there are many Ada holders that will not sell. As the Ada price gets bid up, holders will start to figure out what is happening long before 51% of the supply is bought. The price appreciation in attempting such would be astronomical! If you realised that someone was attempting to own 51% of the Ada, how much would you sell your Ada for?
A government has many more attack options against Bitcoin. For example, they could sign a contract with the major chip manufacturer for the next super chip. This super chip might have general compute power, not just hashing power, so it would have alternative uses. The chip manufacturer is a physical businesses, with people running it, in buildings, in the real world, that comply with govt regulation. The chip manufacturer also has no allegiance to the Bitcoin miners.
What worries me about Bitcoin is that as the halvings continue the security budget of Bitcoin is decreasing. There comes a point where there is much more real world hashing power that is doing stuff other than mining Bitcoin. This hashing power, doing other stuff, can be turned against Bitcoin.
I don’t know how much combined hashing power the military, government, and university super computers have currently, but these computers are going to keep doubling in power every couple of years and they are already government controlled. If the Bitcoin price doesn’t go up much before the next halving, will the same number of miners remain? Or will some take their hashing power to do something else?