Ethereum Founder Vitalik Buterin Asserts that PoW Penalizes Miners with Low Hashpower

Vitalik Buterin argues that PoW mechanism punishes miners with lower hashpower.

Despite the former promising more energy-efficient solutions and better throughput, the Proof-of-Stake consensus mechanism and Proof-of-Work consensus mechanism have been the subjects of an age-old debate in the crypto community. 

Some PoW proponents – especially Bitcoin maximalists – have taken to baring certain perceived flaws with PoS. Buterin recently launched a counterargument against one of such assertions.

A renowned Bitcoin maximalist and former Blockchain research lead at Colu, Udi Wertheimer, took to Twitter to point out some perceived issues with PoS. According to Wertheimer, contrary to post popular belief, PoS is not built to reward yields to stakers. Wertheimer argued that these yields awarded to stakers are, in fact a way of penalizing non-stakers.

“you don’t get paid for staking you morons; you just get penalized for not staking. I can’t believe you still don’t get it lmao,” Wertheimer added.

PoS rewards aren’t “yield”, in fact they’re not even rewards, they’re just penalty to people who don’t stake

you don’t get paid for staking you morons

you just get penalized for not staking

i can’t believe you still don’t get it lmao

— Udi Wertheimer (@udiWertheimer) September 12, 2022

Vitalik Buterin, co-founder of Ethereum, thought it necessary to counter Wertheimer’s odd assertion. Buterin argued that, if the assertion is to be considered across all consensus mechanisms, then PoW penalizes people whose percentage of hashpower is less than the percentage of the supply of the asset. 

“And PoW penalizes anyone who has a smaller percentage of hashpower than their percentage of the coin supply.

(Actually, it penalizes much more than that because profit < revenue, but you get the point),” Buterin noted in the tweet.

And PoW penalizes anyone who has a smaller percentage of hashpower than their percentage of the coin supply ☺️

(Actually, it penalizes much more than that because profit < revenue, but you get the point)

— vitalik.eth (@VitalikButerin) September 12, 2022

Buterin’s counterargument highlights a few issues encountered with the PoW mechanism. Generally, miners don’t see as much profit when their hashpower is relatively low compared to their ratio of coin supply. This is due to the increasing competition in the Bitcoin mining industry, as mining difficulty soars with more miners entering the market.

Additionally, with the rising cost of electricity, miners are seeing less profit in the industry than before. Buterin’s line of argument is aimed at countering Wertheimer’s assertions. Wertheimer’s point was based on the fact that non-stakers get diluted as more tokens are pumped into the space to reward stakers. This adds to the inflationary trend of the asset.

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