Proof of Work vs. Proof of Wealth

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In this video, I discuss the differences between Proof of Work and Proof of Stake (which I have renamed as "Proof of Wealth" to better highlight what it really is).

Only decentralized consensus achieved through Proof of Work can provide neutral and ethical money for the world.

The global financial system already runs on a version of proof of stake (where those with the most coins exert the most power over the money and the system), and it would be a shame to recreate this system by relying on proof of stake cryptocurrencies.

Proof of Stake is easy to fake or game.

By contrast, there is no way to fake or game Proof of Work.

Proof of Stake doesn't solve the Byzantine Generals Problem.

There is no way to achieve decentralized consensus with Proof of Stake, no matter how much smoke and how many mirrors you deploy.

Remember this the next time you hear Vitalik or Charles Hoskinson try to muddy the waters.

Not investment advice! Consult a financial advisor.

Proof of work:

Proof of stake:

Do you like the current proof of stake system?

I am not being paid or otherwise compensated by any company or cryptocurrency project that I mention in my videos.

My opinion is not for sale. Please do not contact me with any affiliate or advertising deals.

#bitcoin
#proofofstake
#proofofwork

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[Bitcoin_University]

Please enjoy this new video that I recorded before I went on vacation.

[DestructorEFX]

I expected to hear Bitcoin University at the beginning 😂

[pinoysatoshi]

You are a living legend for the Bitcoin community!

[Atlas_]

As a lifter (no steroids), I can really relate to your Proof of Work example! 💪

[JesusIsELOHIM]

DCA weekly into Bitcoin and in the end you will win

[ml]

The main problem I have with PoS is that some of the fundamental assumptions in PoS are flawed.

For example, it assumes that {custodian = owner}, so whoever has custody of the stake has a vested interest in keeping the blockchain secure. This is not true in practice, where exchanges always end up being massive node operators with proportionately extremely little at stake themselves.

[starchaser]

PoS also incentivizes everyone to risk their entire holdings, making them exposed to potential slashing. Whereas PoW incentivizes everyone to self-custody their entire holdings, and only miners take on risk of securing the network.

[redman]

Great content Matthew, I really enjoyed the Arnold analogy as PoW.

I think of PoS very similarly to you, in that it it simply the digital representation of the analog fiat system (and is, in fact, feudalistic not capitalistic at its core), but I never connected the final dot that it *literally doesn’t solve the Byzantine General’s problem*.

Great video. Have a nice vacation! Look forward to more content from you when you’re back full time.

[goldeneraarchives]

After finding this channel I went from owning no bitcoin to now holding almost 1 whole btc. Wish I had bought back when my dormate had told me about it for the first time, in September 2017!!! Still smack myself in the face for not listening to him, however you sir have fully convinced me with your simple yet brilliant explanations. I really enjoy how you explain things without jargon and break them down to where anyone can understand, it shows you truly know what you're talking about.

[bujin]

3:43. I'd love to see a video that goes more into detail on this point. It's a good observation. If you're not using PoW how does the system get it's heartbeat or clockrate? Under PoW, we know when a new block is ready, because someone solved the hashing problem, and thus you get a block. With PoS what actually triggers the next block event? It seems like you'd need some sort of central trusted coordinator to signal that one block is done, and we're ready to move to the next. Of course, if you're doing that, what's the point of any of this? You might as well be running a SQL server.

[theskintones]

Beautifully explained Matt, this is brilliant. I will share this around to help my friends understand the importance of POW vs POS....t ! Look forward to your great content.

[RONIN_SATS]

Great video Matt!! Very important info.
The difference between POW and POS are vast and crucial. It would serve everyone well to know and understand what they are and how they apply. This is going to be very important in the coming years. Does not matter if you are "into" bitcoin or not.

[zochzod]

Great take; haven't heard it put this way before, but really puts it in moral perspective

[Firithfenion]

LOL 'Proof of wealth' that's a good one, I have to remember that.

[gowinidea]

Thanks Matthew for the class video! Looking forward to welcoming you back from your vacation. For now, keep calm and learning from your videos.

[xezon]

You could title Proof of Work as Proof of Wealth too. Hardware and Power cost money, and no broke person will compete with big mining facilities.

[Johntron]

Love this content. I’ve watched every single bit of Michael saylor content on YouTube, finally someone else can communicate bitcoins value using pure logic, no fluff. Keep it up!

[sporegnosis]

Proof of Stake is also unstable, because the stakers are not heavily invested in any work. In a comming unstaking cycle of their network, they can unstake everything and dump it all in the market in 5-10 mins, while the network node machines are jusy some standard servers that can do any other work. In contrast, BTC Miners are heavily invested in mining ASICs, Industrial scale buildings and Industrial scale Power supply contracts - so they can't just vanish and turn against the network on a coin toss. A miner faces heavy losses if he shuts down as it is extremely difficult to sell the operation and walk out with a reasonable % of his initial investment. Also the fact that mining pools are decentralized means that no single miner can elect to discriminate blocks - they either work on what the pool is doing or can just start their own pool or work on a block alone.

[liquidreality]

Proof of work is proof of wealth: ASICs are expensive

[cxbmtx]

100% correct. I am joining BTC university!