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How Proof of Stake is Devastating for the Crypto Space? – Coinnounce

How Proof of Stake is Devastating for the Crypto Space?

The space and industry of the crypto world are undergoing a major changing phase. The world was never going nuts about this industry to this level. Crypto space has occupied a prominent place in the transaction world. Now, with the significant changes going on, significant challenges are knocking the door of crypto space. Several things need to be upgraded as per the requirement.

Till some years ago, crypto space was using a consensus rule known as Proof of Work (POW). POW provided security and reliability during mining of nodes. However, there were some limitations like massive energy consumption, low accessibility of mined data, etc. which led to thinking of some other alternatives too. The new consensus protocol was named as Proof of Stake (POS). But still, the consequences of this new algorithm for mining are too destructive for crypto space.

This article focusses on the factors proving how proof of stake is devastating for the crypto space:

New safety and legal challenges:

POS is a new consensus algorithm and has a set of new financial and business protocols for mining of crypto network, and this is no certainty that these protocols will maintain the security and trust as provided by POW. And if these challenges are avoidable, then that’s not a problem, but in case, if they are not preventable, no one in the crypto space would wish to take the risk about the security and privacy wallet and crypto account. Thus, using POS may lead to some unknown security breaches in the crypto industry.

The problem of Monopoly in POS:

In POS, the network is authorized and control by the stakeholders having a majority of the stake. They can control the financial as well as a professional system to a considerable extent. This leads to the problem of monopoly in the market of crypto space. The significant stakeholders can make an important decision without informing the developers, designers, financial. If the decision is in right directions, then there is no problem, but if they start to decide to fulfill their greed, this will affect all other in the network. This may lead to a centralized form of the crypto network which in some cases is preferable while non-acceptable in few cases.

The problem of 51% stake:

It is possible that a cluster of small and medium stakeholders join together and gather 51% of the total stake. In that case, as per POS, any stakeholder having 51% of the entire stake would be the major and control the network. These cluster of stakeholders can control those having even 49% of the total stake. Also though to gain 51% of the entire stake, a considerable amount will be needed but if by any means, it is achieved then it will become the most superior and will make rest as their slaves. And apparently, the crypto industry will not accept this kind of possible scenario.

The possibility of losing ‘vote’ in the network if hacked:

If your wallet is hacked and you are using POW protocol, you will only lose your coins, but your ‘value’ in the network will remain same, i.e., you will have your mining control still. But, if you are using POS and your account is hacked, then your coin would be lost as well as you would lose your value in the network too. This means you would lose your mining authorization and control over the network. This means that even though POS overcomes some drawbacks of POW, but is more prone to forget everything in case of hacking.

Inefficient solution to initial distribution:

Proof of Stake, in which the amount of stake a person has a very strong point, the problem of the absence of an efficient algorithm for initial distribution. In a team, how it should be determined that who will be getting the coins initially to stake them, this problem may lead to conflict among the team members which is not a good impact and sign for crypto market. This problem needs to have an optimal solution.

Nothing at Stake’s problem:

Ideally, if you have two forks and you want to choose the better one, you will select the better fork as per you and will continue, but in POS, the situation is not same. Here, the fork may choose all chain forks and thus may lead to a false double pace of spending without having any stake. This problem may devastate the crypto network. This type of problem was not possible in POW where the factor of computational complexity was not ignored, hence, complexed and costly chain were left but POS leads to this problem, and it is not a good sign for the future of crypto space.


The crypto space is affected mainly by three factors: Security, Decentralization, and Scalability. And it is nearly impossible to present an efficient solution to all three at the same time. Proof of Stake, although tries to solve the problems of decentralization and scalability to some extent at together, somewhere it fails in the security. This article explains the reasons through which it can be depicted that proof of stake (POS) is devastating the crypto space and there must be alternatives or efficient solutions to accept proof of stake as the standalone consensus algorithm for the crypto market.

Nadja Eriksson

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