Cryptocurrency community has been in a civil war of sorts regarding which consensus algorithm is better. At one end there is Ethererum’s Proof-of-Stake (PoS) and on the other, there is Bitcoin’s Proof-of-Work.
Xinxi Wang, Director of the Litecoin Foundation and CEO of Coinut exchange talks about the advantages and disadvantages of Proof of Work consensus mechanism over Proof of Stake in an interview. According to Wang:
“I don’t see advantages of PoS over PoW. People criticized that PoW consumes energy. But that energy was used for good, i.e., security.
In Proof of stake system, instead of miners spending computational energy, holders of the currency stake their coins to validate the transactions and are rewarded for doing so. Many experts in the Bitcoin community have referred to this system as a plutocracy where the rich get richer unlike Proof of Work which is a meritocracy where the miners with the most efficient equipment earn more.
PoS has problems like the rich get richer, and that if a group of people controls more than 51%, no one can break that control, while for PoW, you can invest more hash power to break the control”.
Xinxi isn’t the first one to criticize the staking mechanism by PoS. Litecoin’s creator Charlie Lee himself has criticized the algorithm.
In a PoS consensus algorithm, few nodes are chosen at random to generate the block. To be a verifier node, a node has to stake some tokens. On every successful block generation, the node is rewarded with reward tokens. In theory, PoS is faster, but there is a major problem regarding the democracy of the blockchain.
For a node to be selected, the node has to stake some tokens. The higher the staked token, the more the number of mining opportunities are given. This means that a rich mining pool gets more blocks to mine, rather than a single entity with multiple GPUs or ASICs.
The community believes that PoS is against the democratic nature of Bitcoin.
Charlie Lee, Creator of Litecoin announced that he plans to add confidential transactions to LTC earlier this year. They are working with Beam, privacy-based Cryptocurrency to explore the implementation of Mimble Wimble technology to Litecoin.
Wang who is also a Litecoin core developer expresses his excitement for the implementation of Mimble wimble technology into the Litecoin network.
“Monero’s ring signature based CT has the issue that its UTXO (TXO to be exact) set is ever growing and thus causes scalability issue. MimbleWimble is effectively CT + CoinShuffle and thus doesn’t have this issue.”
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