top of page

Is Proof of Stake a Mistake Answered by an AI

I want to start off by saying there is a bias in this post. Being a GPU miner obviously I'm going to have a stronger opinion on POW but also taking into account the basic principles of Crypto Currency will make this post biased. I will be reflecting on the answers provided by the AI at the end. In order to remove my personal bias on this topic I will be asking the EleutherAI questions about Ethereum, proof of stake, proof of work and its understanding of crypto.


I Prompted the AI: "What is Ethereum" and received the following answer:

Ethereum is a distributed public blockchain platform built by a group of developers, the Ethereum Foundation, in order to revolutionize how computers and the internet work. Ethereum aims to become the de facto internet that everyone uses by removing the need for middlemen like banks and governments to collect and store your data for you. Ethereum is a decentralized oracle system that can perform calculations across any number of machines, without needing a centralized server. This allows Ethereum to be an extremely effective way of transferring data and compute power across the globe, and is currently the fastest solution to the scalability problem of the internet.

What is a Blockchain:

Blockchains are a set of cryptographic proofs that can be generated and added to a distributed ledger. These are often referred to as the ‘blockchain of blocks’. The beauty of blockchain technology is that these cryptographic proofs can be verified by everyone on the network, by verifying each block they are added to the ledger with the Ethereum public chain. Ethereum is set on a blockchain technology with a unique consensus protocol that allows Ethereum to run its consensus mechanism, which is how the network regulates how blocks are added to the ledger and verifies the blockchain. You can think of the consensus protocol as a democracy, where everyone can vote with their stake in the network. The most-voted block in the blockchain is then the block that is added to the network. A blockchain is not a database, and the contents of a blockchain cannot be changed, however the votes that are cast on the blockchain can be changed. For example:

Vote: Alice, Jane, Andrew vote ‘no’ to Bob

The blockchain of votes: Bob’s vote: 2

The blockchain of votes: Jane’s vote: 0

Alice’s vote: 2

Bob’s vote: 0

Bob’s vote: 2

In this case Alice voted ‘no’ to Bob in the Blockchain of votes, but had no way to know this at the time of the vote. Ethereum’s blockchain uses the Ethereum Virtual Machine and its Solidity programming language to manage the state of this blockchain, thus eliminating the need for a central consensus protocol for running and verifying the state of the Ethereum network. You can learn more about Ethereum here but the basics is that this is a ‘decentralized’ or ‘distributed ledger’ platform or system.


The rise of decentralized finance, tokenized assets and blockchain technology has sparked a great amount of controversy. Centralization versus decentralization: the debate that is still raging on is perhaps the most important debate for any aspiring market participant. We have seen that the technology has the ability to revolutionize all fields of business. And, we have seen how the technology is not only used in the financial market but more importantly how the technology is being used for more legitimate activities like healthcare, education etc. Decentralization is the most important aspect for any of the emerging technology and this is where the controversy comes in. The debate surrounding decentralization is very interesting but at the same time highly controversial. The main point of contention of decentralization is that while it is true that decentralization can benefit a number of companies, the opposite is also true. That is decentralization can benefit a company by allowing it to be more efficient and save costs. This can be seen from the example of Uber where the company has saved over $1 Billion in the last six years by decentralizing operations, and has the added benefit of creating a more efficient organization that is able to deliver on its promise of ‘low prices’.

What Is Decentralization:

The definition of decentralization is best captured in the work of Michael Arrington to be defined as follows:

“The most important way to think about the decentralized web is as a network of autonomous servers, each of which can be in a “faulty state” or a “healthy state” for a very short period, and then can be switched into either state as needed to achieve the performance required by a particular application.”

The term decentralization can also be expanded to refer to any ‘decentralized network’ which means that the nodes in the network are separated from each other by communication lines that they themselves maintain. So, while the network can contain nodes that are not directly associated with the company and this is where the decentralization aspect is relevant, there is no central point of failure and there is no single point of control. Even though that network is decentralized, at its core, it is still a non-profit entity with no direct association with anything and the idea that money is being generated from its network is not something that it is taking into consideration. Thus, a decentralized non-profit network can not be called a decentralized network, and it would be incorrect to call it simply a non-profit.

The term decentralization is a term that has been used so widely that it has become a little ambiguous. The technology can be thought of as decentralized because the node that sends the transaction is not within the company or a bank. The fact that money is not directly exchanged makes it decentralized. However, to think that there is no central point of control and no association with the business being decentralized is a false premise. The issue is, as with any technology, even though it is decentralized, but there are still problems that need to be addressed within the system.

The Problem with Decentralization:

In the previous section the definition was given: decentralization can refer to the fact that the nodes in the network are separated from each other. For example, consider that the company that is generating revenue and does not have any direct association with the network itself is the nodes of the network. The nodes are not directly associated with the company, and thus, they have no direct association with the company. However, this is not to say that the company does not take their profit from these nodes and so the company will be able to do it by making a decentralized network. So, it becomes very important for the company to understand how the network works.

The first point that needs to be addressed is the fact that a company is in this position of control. A company, in this case an asset can not operate without the control it receives from other third parties. Control is the major factor in maintaining a network because all the nodes are in a position of control. The network is a collaborative system, and the nodes are only able to operate the system if others are involved with the system. The networks have been considered to be as a community. This means that the nodes and the nodes network are a team that must communicate with each other to achieve the goals of the organization.

Now, just because money is not being generated in the network but rather, the company will receive money from its operations, that does not mean that the company is out of control. In fact, the issue of control may be one of the most important factors to the company because as long as the company operates correctly and does make money from the network, it will never be able to run out of control. The issue of control is why it is very important for any company to address the issues with the decentralized network.

Proof of Stake:

The original idea of proof-of-stake, is to give control of your wealth back through a consensus-based system, by having an active voting population choose the next block from the top of the chain. The problem with this idea is how to keep the system from being manipulated by selfish nodes (that do not contribute to consensus) or by greedy nodes (that do contribute to mining power), which can become a large problem in the long term. The proof-of-stake algorithm is designed to prevent this.

To achieve this, the proof-of-stake algorithm introduces a new concept called a block weight, which is used to reward nodes which participate in the consensus, in each block.

A block weight is determined by an internal parameter, called stake, which is equal to a node’s weight (the number of coins) minus its total vote weight (the difference between the number of votes cast in the previous block and the current total block weight).

In the event of a tie or a very large difference, the next round of voting chooses a tie-breaking vote to break the tie.

This is similar to how the Bitcoin core developers chose to determine valid blocks which will get full bitcoins in the future as a byproduct of their protocol design.

The original idea of the proof-of-stake algorithm was to force selfish nodes to behave more honestly and contribute more to the consensus. In the Bitcoin protocol, where selfish nodes are known as “miners” (they are the ones who have the most power and thus are the ones who try to manipulate the system), a proof-of-stake system has the potential to be a major player in improving the overall security of the system; as selfish nodes will hopefully be forced to behave more honestly, thus becoming more honest miners, and therefore more contributing nodes, overall.

To better understand this, let’s look at an example in which a miner is corrupt, i.e. tries to manipulate the system. A dishonest miner will change the total block weight, thus changing the reward for the next consensus round. It does this by using the tie-breaking vote. By doing this, it can potentially give away block rewards to itself and get block rewards for blocks that don’t have enough blocks to reach the consensus, potentially gaining more than a normal miner. In fact, it can become the majority miner of the system, essentially becoming the new majority-voting node.

From what has been seen of proof-of-stake, it appears to be a solution that will allow honest miners to gain back the trust of honest voters, by having them choose the next block with the highest block weight, instead of just using the consensus as a byproduct of their mining efforts. This approach has been proposed as a way to fix the issue of selfish centralization in proof-of-stake systems, while improving the overall security of the system.

A proof-of-stake system is often depicted as being between miners and voters, and is sometimes presented as an inverse relationship. However, in proof-of-stake, both miners and voters are active participants in the consensus, using their own computational resources. The miners are responsible for determining the block weights, while the voters use their computational resources to determine which blocks get included into the consensus.

Proof of Work:

Proof of Work has been around for many years now. It is used to verify the validity of a transaction and distribute the monetary reward.

PoW simply requires miners to solve the puzzle and verify the block. The puzzle is simply a problem that must be solved to verify the validity of the block (and thus the validity of the transaction). In addition we need to solve the puzzle only once to verify the validity of the block. When a new block is created, the previous block must be verified first to ensure that the block is valid. The proof-of-work algorithm is like the problem of finding a single letter in a dictionary. Once the letter is found, it can be verified to ensure its validity.

There are several variants of PoW algorithms like Scrypt PoW.

We will use the Scrypt algorithm as our example, which is based on the Keccak and Serpent (K-s) construction. The Scrypt algorithm was introduced in 1999 and it is still used today. Scrypt is fast and it has a large internal memory and small external memory, allowing it to be used on a wide variety of computers. The Scrypt algorithm is used as the baseline for our comparison to PoW.

PoW has a fixed internal memory of 32 bytes, allowing it to verify a block in less than 0.0001 seconds. The main advantage that it has over other verification algorithms is that the internal memory is fixed and does not need to be increased as required by the verification algorithm. As a result it can potentially verify a block that is much bigger than 1 MB and verify it almost instantly. However there are several drawbacks.

It has a small external memory, allowing it to verify a block in less than 1.6 seconds. The external memory increases the time required to verify the block, which reduces the speed of verification.

We can verify a block in less than three minutes. However, depending on the hash type used, this may take more time.

A block can be verified in less than 60 seconds. The reason for the speed difference is that the verification algorithm has to generate all of the hash values, and then check for any discrepancy before it can be verified.

What is the difference between Proof of Stake and Proof of Work:

Proof of Work is a simple consensus algorithm where nodes in the network are required to validate transactions. This means that the node must be able to validate transactions, by solving a mathematical problem, that is a form of proof of work. Proof of Stake is a consensus algorithm that does not require the nodes to be able to validate the transactions. However, it is possible to allow the nodes to validate the transactions. In proof of stake, it is not required for the block finisher to hold a block, however it is required to be able to calculate the network stake, which is the amount that is calculated based on the total number of stake, which is the total amount of tokens in the system, and the stake of that node. The total number of tokens is the total amount of tokens that are being distributed. The stake of node is the stake that was generated due to the work in the network. In the scenario where the node is not able to validate the transaction, the node is unable to receive the rewards.

So, the node is required to validate the transactions, which makes it a simple consensus algorithm, but does not require the nodes in the network to be able to validate the transactions. This also means that the network stake will not be possible to calculate based on the total number of tokens, but it is something that is possible to calculate and will help with the network stability.

My Conclusion Based off AI Answers:

Lets start with POW as I am not biased at all. It seems like the AI only has an issue with the block being validated only once. I believe this argument is countered by the simple fact that there are both stale and rejected shares. These shares have been validated a 2nd time to ensure they are a correct solution to the mathematical algorithm the GPU's or hardware are currently solving. POW miners are also constantly validating transactions by referring back to the trusted ledger. This means any illegitimate coins are also being validated against the block that have already been solved. It also seems like the AI has an issue with the amount of time it takes to solve these algorithms with the limitation that it only dove into 32 bit algorithms. I don't see this as an issue either as the algorithms are constantly getting more complex and taking longer to solve with variables that effect this.

Proof of stake:

I don't believe the AI had any issues with POS and actually was biased in its answer as it referred to BTC which is still a POW coin. It completely contradicted the main goal of Crypto Currency when it brought up block weights and how users with more coins earn more rewards. This creates more of a central principle around Crypto. Lets use ETH as an example, if you want to start a Node you need to have 32 ETH which is not a reasonable amount to invest in a speculative assets for the average person. Whereas $300 for a GPU any gamer can throw down, decentralize the network and earn some extra income.

Does this Matter:

In short no it does not matter. ETH is switching to POS weather we like it or not, and even if it didn't stands to be one of the more centralized crypto currencies in my book. If you look in the past when ETC got hacked, ETH became a fork of ETC to stop illegitimate coins from messing up the ecosystem and this was sent out by the devs. They are also changing the protocol for how coins are "mined" and rolling it out without any vote from the community. This just goes to show that ETH was centralized to begin with.


bottom of page