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- Vitalik Buterin, the creator of Ethereum, has released a post explaining the benefits of PoS.
- Buterin states that there are three main reasons why PoS is superior to PoW.
Satoshi Nakamoto, alias of the creator or creators of Bitcoin, used a Proof of Work (PoW) consensus mechanism to build the Bitcoin blockchain. Many other cryptocurrencies have used the same algorithm to develop their blockchains, including Ethereum. However, recently, Vitalik Buterin, the creator of Ethereum, and other developers have shifted their views in favor of a Proof of Stake (PoS) algorithm. There are several advantages that PoS offers show in Buterin’s latest post.
The argument in favor of Proof of Stake
Ethereum 2.0 (Eth2) is the most significant update of the Ethereum network, which was supposed to be launched in early 2020 but has been postponed several times, currently slated for December. The update is intended to replace the network’s PoW consensus mechanism with PoS.
One of the main advantages of the PoS mechanism is security. According to calculations made by Vitalik Buterin, the total cost of an attack on a GPU-based PoW is approximately $ 0.26 (6 hour attack). An ASIC-based PoW would need $ 486.75 for the same attack, while PoS would require at least $ 2,189.
In the long run, this cost is expected to increase further, as staking becomes more efficient and people feel comfortable with lower rates of return. I personally expect this number to rise to something like $ 10,000.
Furthermore, Buterin also discusses the fact that if an attacker can successfully perform a 51% attack on a PoW system, there isn’t much that can be done to stop it. The only answer in practice was “wait until the attacker gets bored”.
In a PoS system, however, there is an integrated mechanism that can destroy much of the attacker’s stakes as the community can coordinate a “user-activated soft fork” (UASF). Buterin also says attacking the chain would be extremely costly, while the community can recover quickly in a matter of days. Buterin also said:
Furthermore, the proof of the stakes is more resistant to censorship. GPU mining and ASIC mining are both very easy to detect: they require huge amounts of electricity consumption, expensive hardware purchases, and large warehouses. PoS staking, on the other hand, can be done on an unassuming laptop and even a VPN.
Ethereum explodes at $ 446 and points to the 2020 high of $ 488
After a significant breakout from an ascending triangle on October 21, Ethereum’s price retreated to retest the lower boundary of the pattern, successfully defending it from October 30 to November 4.
ETH / USD daily chart
The 50-SMA and 100-SMA acted as healthy support levels and the price of ETH took a noticeable jump on November 4th from a low of $ 376 to a high of $ 408. The current price of Ethereum is $. 437, as the bulls aim for $ 488 as the next stop.
ETH IOMAP chart
The In / Out of the Money Around Price (IOMAP) tool shows virtually no resistance up to $ 503, in contrast to support levels which could be seen more clearly. The $ 384 to $ 397 area, where 2.03 million addresses bought 13.32 million ETH, is a solid support zone. Vitalik Buterin’s latest announcement states that the initial implementation of eth2 will be ready by December 2020, which is adding a lot of pressure to buying Ethereum.
On the other hand, the daily RSI is on the verge of overextending, indicating that the price of ETH is seeking a short-term correction as it did on September 1 when the digital asset fell from $ 488 to $ 308 in just four days. The next bearish price target would be the horizontal support level at $ 390, which coincides with the support provided by the IOMAP pattern.
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