Is The Transition Towards Proof Of Stake Worth the Investment?

The recent hue and cry around the Proof-of-Work (PoW) consensus has made many new and upcoming cryptocurrencies to move towards the Proof-of-Stake (PoS) consensus The main reason for the transition is said to be the over-excessive Hash Rate wars that go into the mining of the PoW based cryptos for the Block Reward.

PoW based cryptocurrencies require a ton of energy to keep the mining rigs operational. It has been a growing concern for the environmentalist and the miners as well. Since the cost of setting up the rig and energy charges leave very little profit margins.

PoW faces an uphill task both in terms of computational efficiency and public perception as an environmental hazard.

Proof of Stake & Delegated Proof of Stake

Proof of Stake is increasingly being seen as the next best consensus and a replacement for Proof-of-work. Out of the total top-15 cryptocurrencies, four make use of the PoS, which amounts to a total of $6Billion in valuation.

Out of the top-19 cryptocurrencies, 3 make use of PoS and another three use delegated PoS, bringing the number to 6. If we add Ethereum to the group, the total valuation that PoS consensus brings to the table reaches $18.8 Billion. Still, it is less than a third of the total Bitcoin Market cap of $64 billion.

Can Proof-of-Stake consensus Replace Proof-of-Work?

Many in the cryosphere consider PoS and DPoS as the true notion of representative democracy at the cost of some centralization.  PoS is like staking you assets to claim the Block Reward, which might give rise to the hoarding, or manipulation of your tokens by exchanges.

People who are against the notion of PoS or DPoS argue that the staking consensus might lead to centralization of resources, thus killing the central idea of decentralization in cryptocurrencies.

DPoS can be improved upon to make sure staking does not lead to centralization and developers are already looking at ways to create decentralized pools, or a ranking system like the Proof of Importance consensus can make the PoS a good potential contender for upcoming cryptocurrencies.


On one side we have Proof-Of-Work on which Bitcoin has been based and over time the network has become so crowded that the consensus either need a timely update to make sure the energy consumption can be contained.

Looking at Proof Of Stake, the problem is centralization and the consensus can take us back to the banking age where the financial institution with higher reserves hold the monopoly over others.

As a part of the crypto community, we do not need either of them. What we can do instead is look for second layered solutions like the Lightning Network, which promises to solve the scalability part of the Proof of Work consensus.