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ETH’s Vitalik Buterin: Bitcoin will also need to consider ‘painful transition’ to PoS to keep BTC secure

By Daniela Ešnerová

10:56, 2 September 2022

Ethereum's co-founder Vitalik Buterin
Buterin made a series of pro-Proof-of-Stake arguments ahead of Ethereum’s transition to PoS. – Photo: Getty

Ethereum’s co-founder Vitalik Buterin predicts that Bitcoin will need to consider a ‘painful transition’ to a Proof-of-Stake (PoS) consensus mechanism.

According to Buterin, Bitcoin's Proof-of-Work algorithm (PoW) is less secure than PoS and ‘unsustainable’, he argues in an interview with Noah Smith, published today.

Ethereum, the world’s second-biggest blockchain after Bitcoin (BTC), is itself in the final stages of the long-awaited transition from PoW to PoS. The switch, known as the Merge, is expected to finalize between 10 and 20 September.  

ETH to US Dollar

The 28-year old calculated that PoS can buy “something like 20 times more security [than PoW] for the same cost”. 

“Basically, participating as a PoW miner has medium ongoing costs and medium entry costs, but being a PoS validator has low ongoing costs and high entry costs,” he said. 

“It turns out that how secure you are depends on just the entry costs, as that's what an attacker has to pay to attack,” he added.

SOL/USD

174.20 Price
+2.860% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

DOGE/USD

0.13 Price
+7.740% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

BTC/USD

67,289.05 Price
+0.690% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

XRP/USD

0.60 Price
+3.570% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

According to Buterin's count, if Bitcoin's network grew to $5trn, it would only take $5bn to attack the chain.

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Highly democratized early PoW is ‘not coming back’

Buterin acknowledged that the transition would be politically unfeasible among Bitcoiners - PoW proponents.

BTC to US Dollar

But he predicted that a successful attack on Bitcoin's network could lead to a change of heart: “Of course, if Bitcoin actually gets attacked, I do expect that the political will to switch to at least hybrid PoS will quickly appear, but I expect that to be a painful transition.”

Buterin also noted that PoW mining farms outside the US “seem to be close to various governments,” and hence the narrative of PoW being censorship resistant is “highly contingent in the future.”

“The highly democratized early proof of work era was a beautiful thing, and it helped tremendously in making cryptocurrency ownership more egalitarian, but it’s unsustainable and it’s not coming back,” the most famous person in the cryptocurrency world asserted.

Markets in this article

ETH/USD
Ethereum / USD
3521.40 USD
22.46 +0.640%
BTC/USD
Bitcoin / USD
67289.05 USD
460.7 +0.690%

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The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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