In a letter to the U.S. Environmental Protection Agency, several dozen reputable U.S. companies said that Proof-of-Shares (PoS) systems are extremely high risk of corporate capture because PoS turns new financial systems into pure plutocracy.
The companies were thus responding to statements made by Congressman Jared Huffman, who recently described bitcoin (BTC) mining as something that “poisons our communities” and contributes to “air, water, and noise pollution.” According to representatives of the crypto industry, Huffman’s letter is “based on several misconceptions about bitcoin and mining digital assets that have been debunked before.”
The letter was signed by executives from many mining companies, such as Core Scientific, Argo Blockchain, Foundry Digital, and one of the largest holders of BTC MicroStrategy.
In his letter, Huffman wrote that “less energy-intensive cryptocurrency mining technologies such as PoS, which require 99.99 percent less energy than PoW to verify transactions, are also available.”
However, according to cryptocurrency industry players, the reason PoS is not suitable as an alternative to the energy-intensive PoW-based mining process is that this algorithm tends to give too much power over the network to fewer participants.
Given that many cryptocurrency owners prefer to keep their assets with large depositories, this fact inevitably leads to risks and centralization in the PoS system.
… In practice, these intermediaries tend to accumulate most of the supply,” the letter’s authors say, adding that the new rules make it even more difficult for new depositories to enter the market, leading to further consolidation of the industry.
Thus, the risk of corporate capture in PoS systems is extremely high,” the letter authors summarized, citing the takeover of STEEM by Tron (TRX) founder Justin Sun as an example.
Simply put, Proof-of-Stake turns these new financial systems into pure plutocracy – a result that contradicts the essence of instruments originally conceived as decentralized, global and completely devoid of political barriers to entry.
Since bitcoin was created specifically to strip away the influence of intermediaries, it is crucial that it remain based on a proof-of-work algorithm.
According to the letter, given that PoS and PoW have qualitative differences, it is incorrect to call PoS a more efficient form of PoW because it is designed to be different.
In addition, according to the letter, PoS should be understood as an industry term for a shareholder-managed financial consortium.
In today’s PoS systems, it is the largest holders of tokens, even if the token holder’s management is not directly encoded in the protocol,” the letter’s authors wrote.
The letter from major crypto players also consistently refutes each of the points made in the congressional letter, including allegations of “environmental risks and pollution” associated with mining, the reopening of closed coal and gas facilities by mining companies, and false claims of energy consumption by a single bitcoin transaction.