More About Proof of Stake and Luna
In my last article I described the flaw with terra but did not elaborate much beyond claiming the superiority of proof of work. That is my opinion, but I should be willing to admit that the principles behind proof of stake are possible.
I also need to clarify why Luna was such a failure. When creating a proof of stake blockchain, it should only be used as a vehicle of trust between two free market parties. That is to say, you are creating the foundation which others will build off of. Having a blockchain does not inherently ensure a failure free environment.
Actually, we have proven that we are so early in this technology that failure and catastrophe should be a reasonable expectation for anyone involved in this financial technology.
Ill state again, the value of the blockchain is that it ensures fair and trusted connections between two parties. A blockchain will not ensure a dollar peg will be maintained, there is no mechanism within the technology to do anything but keep the network online.
The value of the coin is only the coin. One bitcoin is one bitcoin. One Luna is one Luna, not $100 even if you can trade one for $100 at the time. So how to we value and distinguish one coin from another? Traditionally it has been to view the network hashrates. The coins that requires the most effort is the most difficult to undermine and therefor the most trusted and the most valuable.
Proof of stake seeks to lower the effort, which is a novel theory. But it has the consequence of creating a less difficult coin and therefor less trustworthy. This can be remedied by substituting what is lost in individual effort with more widespread use. This means that proof of stake relies more on the nature of humans and less on the effort of hardware.
Liquidating a bitcoin mining warehouse is going to require a fair bit more consideration than liquidating an Ada portfolio, for example. Most of us have seen about a half dozen networks survive anything. As long as Eth has been maintained by it’s proven system, it has not failed. They day mining ceases, everyone could choose to liquidate at once. It would not even be possible for every Eth miner to sell their gpus at once.
I dont think PoS is valueless, I think it just needs more time (and more failures) to be considered a proven system that we can rely on like bitcoin or other PoW algorithm based coins.