Why Bitcoin Won’t Move Away from Proof-of-Work, As Climate Groups Want?
Lat week it became known that the co-founder of the Ripple company that produces XRP, is now financing the efforts of two crypto organizations to combat climate changes. CryptoHolder reported that Chris Larsen presented his efforts as a potentially positive impact on the leading cryptocurrency. However, the Bitcoin community did not appreciate these “attempts”, calling this step insincere and regarded it as an attempt to increase the importance of itself and its cryptocurrency XRP.
Despite the fact that the proposal itself was not presented in a formally correct way – that is, as the so-called Bitcoin Improvement Proposal (BIP) posted on Github, some experts tried to explain why such a proposal has little chance of success.
But first, it`s worth reminding what BTC is and how it works
What is Bitcoin
According to the Bitcoin project description published at Coinmarketrate.com, in 2008, a man under the pseudonym of Satoshi Nakamoto launched this coin (its official launch is 3 January 2009) on the basis of the following concept: to distribute it as a release and software to run it on a number of machines so that others could then control it remotely.
The exchange value also adds value to what used to be and what remains to be just a long address for miners. .
It is obvious that after the first creation of Bitcoin, exchanges represented a gradually increasing or decreasing value in accordance with elementary economic logic, with the important difference that, although the BTC is able to convert, it is beyond the control of the world’s monetary reserves. This is a factor that should never be forgotten, and which really matters in terms of industry freedom and benefits for investors.
How the Bitcoin Network Works
The entire Bitcoin system is based on a P2P or peer-to-peer computer network. That is, there are several nodes represented by computers that are not hierarchical, like clients and servers. They are peer-to-peer nodes that can serve as both clients and servers for other terminals on the same network.
Nodes are capable of initiating or competing transactions but there are no central nodes that would be able to control transactions, the operation of the network itself or its security. The network controls itself based on certain mathematical mechanisms that make up the blockchain.
Thanks to this system, it is easy to understand why Bitcoin is being talked about as a free trade currency in which a free market is being formed. There are no central banks to control, and there are no intermediaries to transfer money.
For the security and reliability of the digital currency, Bitcoin has a P2P system that is able to track transactions and guarantees their authenticity and credibility. The big advantage of Bitcoin is that since there are no central banks or intermediaries, the costs of using the system are minimized. There are no conditions for opening an account, and there is also no possibility of blocking an account.
But now it’s worth going back to the experts
Respected Bitcoin expert Anthony Pompliano shared his opinion on this, and said that Bitcoin will not leave Proof-of-Work. He suggested that any attempt to change the code would only lead to the creation of a new, worthless coin.
Pompliano provided a link to an article on Twitter summarizing comments from other experts, including comments from the executive director of the Washington-based cryptocurrency think tank Coin Center. This person is Jerry Brito, who told Fortune economic magazine this:
“Miners earn money through a very capital-intensive business when they invest heavily in mining equipment, which they then use. Meanwhile, the supporters of this campaign, in fact, are asking them to switch to a system in which, on the day of their transition to a new consensus, all their investments become lost and useless”.
Bloomberg reports that members of the climate campaign believe “that about 50% of key miners, cryptocurrency exchanges and key developers have the ability to change the Bitcoin code.” Brito says that this just reflects that they have no idea how things work around Bitcoin.
Bitcoin is a decentralized network that is not controlled by any organization or group. Any proposal to improve it (BIP) must be submitted to the Bitcoin community and voted for acceptance. In reality, this process can take years, and the result is also very uncertain.
It is unlikely that all miners, node operators and developers will agree to a BIP that cancels the main Bitcoin mechanism already created by its founder Satoshi Nakamoto. At the same time, they will have to reach a consensus in order to move the situation in a direction that meets the requirements that opponents of the proof-of-work mechanism imagine.
John Wu, president of Ava Labs, Avalanche blockchain development team, recalled:
“Despite Proof of Work requires a lot of energy, it has been central to Bitcoin`s philisophy and success from the very beginning”.
Wu notes that Satoshi Nakamoto, an anonymous Bitcoin developer, mentions proof-of-work in his famous document on the PTC in the fourth sentence. According to him, any proposed change to this fundamental provision has no hope of success.
What will happen in practice
Theoretically, let’s assume that a certain part of miners welcomes the transition of their equipment to mining another cryptocurrency using PoW and agrees to change Bitcoin. Even if the consensus on the proposal to switch to Proof-of-Stake is sufficient to agree to a change in the form of a BIP, the Bitcoin code will not change automatically.
If some miners and nodes do not agree to launch a new code, which, according to many, is an almost indisputable fact, this will lead to a hard fork. Bitcoin would split into two blockchains: the original proof-of-work and a new one under a different set of rules, for example, proof-of-stake. Regardless of this, a proof-of-work blockchain will continue to exist and process transactions.
“You will have a new coin, but you will still use Bitcoin with Proof-of-Work,” Brito said. “It has already happened. There is a Bitcoin Cash that came out of the BTC. But what usually happens with such coins is that they become irrelevant because there is simply no interest in them. Bitcoin is of interest”.
Bitcoin miners have rejected the ongoing campaign to change the Bitcoin consensus from PoW to PoS, which requires less energy. In practice, making changes will require the consensus of the entire community, which, according to many, is impossible in this matter.
On the other hand, the second largest cryptocurrency, Ethereum, is also still being mined, and although it functions similarly to Bitcoin, it will probably leave the PoW algorithm at the end of this year. However, even here it was a difficult and tortuous path that took years of preparation and effort, and we have not yet seen the result.
Attacks on Bitcoin by environmental organizations may seem unfair to many. Activists, in fact, assume that the military-technical complex as such has no right to exist, and therefore has no right to consume energy. However, many supporters of cryptocurrencies note that this assumption is incorrect, and BTC has a lot to offer the world.
In addition, in many cases, this has led to the development of the production of “green” energy, and cryptocurrency miners get the opportunity to use the excess of this energy or unused environmental resources in places where otherwise it would be impossible.