Vitalik Buterin, co-founder of Ethereum, gave two reasons why he is concerned about Bitcoin’s long-term viability. He cited issues around transaction fees and suggested that proof of stake is better. Vitalik Buterin, co-founder of Ethereum, is concerned that Bitcoin’s security will not be strong enough over the next few years.
First, Bitcoin’s long-term security would slowly shift from mining rewards to transaction charges (as the mining rewards are lowered every four year). He argued, however, that the current transaction fees were not sufficient to provide the same level security.
First, in the long term, Bitcoin security is going to come entirely from fees, and Bitcoin is just not succeeding at getting the level of fee revenue required to secure what could be a multi-trillion-dollar system,” he said.
He pointed out that Bitcoin receives approximately $300,000.00 in fees per day. This figure hasn’t increased much over the past five year, although it has risen to $21 million. Bitcoin miners, however, currently make around $18.5million per day.
Proof of stake is safer than proof of work
Buterin also stated that proof of stake was a better way to provide security for a blockchain network than proof-of-work. Although Ethereum is poised to migrate from proof of work into proof of stake, this is unlikely to be the case for Bitcoin. Most Bitcoiners oppose it.
Buterin was optimistic that it might be possible.
He stated that if Bitcoin is attacked, I do believe that the political will will shift to at least hybrid proof-of-stake will soon appear. However, it will be a difficult transition.
Buterin acknowledged that proof of work is more difficult than proof of stake.
He said, “These are definitely concerns that I worry about. However, I think people exaggerate them.”
These issues were addressed by Buterin, who highlighted problems with Ethereum’s current state — like withdrawals not being possible yet — and said that they would be resolved within the next year.
He then said that staking is similar to mining, and that large mining pools could be close to certain governments. This could lead to censorship in future (something Ethereum is also dealing with).
He said, “The highly democraticated early proof of work era in cryptocurrency ownership was a beautiful thing. It helped tremendously to make it more egalitarian. But it’s unsustainable, and it’s never coming back.”