It’s widely known that Bitcoin is incredibly energy hungry and hence not environmentally friendly because of Proof of Work (PoW). The
Bank for International Settlements (BIS), the central banker’s bank, today published a document that states that Bitcoin and other cryptocurrencies reliant on PoW need to
move away from PoW because long term it won’t enable payment finality.
One alternative is Proof of Stake (PoS) which replaces miners with people who put up their currency holdings as a stake. Dishonesty results in the loss of the stake. The BIS says the success of PoS may rely on “some degree of implicit or explicit coordination by an institution”.
The BIS criticism of PoW is twofold. It states that attacking Bitcoin is inherently profitable, “making payment finality based on proof-of-work extremely expensive.” When a Bitcoin payment is made it is reversible. ie
it’s not final. The likelihood of reversal drops the greater the number of bitcoin blocks that are added later.
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