If you don’t understand Proof of Work (PoW), you can’t understand Bitcoin

Yesterday, an article titled "The fundamental flaw of PoS lies in circular reasoning" briefly discussed the fundamental problems of PoS compared to PoW. Then I discovered that Ryan Selkis, the founder of the famous industry analysis company Messari, recently tweeted to criticize PoW and promote PoS.

Here’s what he said: The PoW debate is so stupid because after the inflation subsidy drops below 1%, BTC will have to switch to PoS anyway.

Obviously, what he meant was that with the halving of Bitcoin production every four years, fewer and fewer new Bitcoins are being created, which means that the block subsidies given to miners are getting smaller and smaller (from the perspective of Bitcoin itself), so it is bound to be unable to support the continued operation of Bitcoin PoW.

However, he seems to have forgotten that the costs of miners, whether electricity costs, machine costs or site costs, are all based on fiat currency. As long as the rise in Bitcoin relative to fiat currency is enough to make up for the reduction in subsidies caused by the halving of production, it will not be a big problem for miners.

Moreover, with the popularity of Bitcoin, the transaction volume will increase, the transaction fees will increase, and when multiplied by the rising Bitcoin price, it is expected that the costs of miners will be fully supported in the future.

As early as in the 2008 Bitcoin white paper, Satoshi Nakamoto wrote: "Incentives can also be funded by transaction fees. If the output value of a transaction is less than its input value, the difference is a transaction fee, which is added to the incentive value of the block containing the transaction. Once the predetermined number of coins have entered circulation, the incentive can be completely transitioned to transaction fees, and there will be no inflation at all."

On February 14, 2010, Satoshi Nakamoto posted on the forum: "In a few decades, when the block reward is too small, transaction fees will become the main source of income for nodes. I am sure that in 20 years, there will either be a very huge transaction volume or no transaction volume at all."

Twitter user Gigi once posted a Twitter brainstorming post, which elaborated on the issues about PoW and PoS. As follows:

“You can’t understand Bitcoin without understanding Proof of Work (PoW).”

“By definition, decentralized systems have no single source of truth.”

“Satoshi’s breakthrough was to build a system that allowed all participants to independently converge on the same truth. Proof of work is what allows this to happen.”

“The purpose of proof of work is to create an irrefutable history. If there are two competing histories, the one with the most embedded work wins.”

“By definition, the chain with the most work is the truth. This is what we call Nakamoto consensus.”

“Why does this work?”

"In short: because work requires energy. You can't cheat it. You can't argue with it. You can't lie. The evidence of the work you did is self-evident in the results of that work."

“In Bitcoin, work is computation. Not just any kind of computation, but computation without shortcuts: guessing. Because there is no progression, there are no shortcuts. Each guess is independent.”

"The beauty is that the work itself is embedded in the solution. The data speaks for itself. The map is the territory. No external source of truth is needed. The work is implicit in the data because of the probabilistic nature of the guesswork."

“Other mechanisms, such as proof-of-stake, do not have this property. You can never be sure that what you see is actually the truth because there is no external cost to creating alternative facts.”

“Computation is the only bridge between the information realm and the physical realm. When processing information, all we have is information and its transformation: computation.”

"Computing requires energy. Energy is the bridge. Energy is real."

"Remove this bridge to the physical world and you're left in a fantasy world: You can't tell what actually happened. You have to trust someone else to tell you what happened. You can't verify it yourself. You have to rely on trust."

“Proof of Stake has many other issues, such as fair validator selection (who decides?), natural centralization effects (more stake = more rewards = more stake), and no natural resistance to timestamp manipulation attacks.”

“Proof of work solves these exact problems. It decentralizes the selection process, creates physical evidence of what happened, has real external costs, and spreads out the time.”

“So the question becomes: How useful is trustless digital sound money? Is it worth the energy cost?”

“For refrigerators, cars, smartphones, and countless other things, society has answered yes to this question. For Bitcoin, the answer is yes among those who understand the societal benefits of sound and censorship-resistant money.”

“To summarize: Proof of Work is not only useful, it is absolutely necessary. Trustless digital currencies cannot function without it. You always need an anchor in the physical realm. Without that anchor, a self-proving true history is impossible. Energy is our only anchor.”

After reading this, we can recall the metaphor introduced by Michael Saylor in the article the day before yesterday, "How the Big Player Who Owns 129,000 Bitcoins Views Bitcoin": Bitcoin is encrypted energy.

The energy anchor gives Bitcoin's blockchain ledger "weight". So, the so-called "longest chain" is actually the "heaviest chain" - that is, if you see a chain with 100 blocks and another chain with 99 blocks, but the total PoW difficulty of the former chain is less than that of the latter chain, then you should choose the latter shorter chain with only 99 blocks as the correct chain.

Tracing back to the starting point of all logic, it is the question of how to define what is "truth" and what is "correctness". This question is, in a sense, a philosophical question.

In human society, the so-called "truth" and "correctness" are relative. For the same thing, such as a military confrontation, A can say that this is to maintain peace (truth), this action is just (correctness), so we call it "liberation"; while B says that this is a naked invasion war (truth), we want to impose sanctions (correctness), so we should call it "aggression".

If people who stand on A's side and people who stand on B's side get together and argue for three days and three nights, can they reach a consensus, a conclusion, or be convinced? Almost impossible. Therefore, for most similar topics, friends with different positions are best to keep silent deliberately, otherwise the result is likely to be "the end of friendship".

Even for the same person, he may hold position A this time, but may hold position B next time. We usually call this "double standard".

A journey of a thousand miles tests a horse's strength, and time reveals a person's true character. If you pay a little attention and observe for a long time, you will find that human beings are really good at double standards.

All those high-sounding words used by humans are self-deception, or they are used to cover up the real factors that determine their stance.

The real determining factor is interest, and the balance of interest ultimately depends on strength.

The underlying rule of this world is still the theory of justice based on strength. Strength is truth. Strength, in the physical world, is military power, and in the digital world, it is computing power (in fact, it is still the proportional energy behind it).

In the face of absolute power, no one will not be convinced. Just like the earth imposes a gravitational acceleration of 9.8m/s2 on everyone, almost everyone is content with it, and few people complain that the earth's gravity restricts their freedom.

What Bitcoin wants to create is an objective existence like the acceleration of gravity.

The peach and plum trees do not speak, but people come to them of their own accord. This is an elegant way of saying it. The vulgar way of saying it is, if you have the ability to do it directly, who would make a fuss?

In the face of doubts and attacks, Bitcoin never cries out. It silently endures everything, constantly enhances its computing power, and insists on using "truth" to convince people.

Bitcoin has mastered the truth by mastering PoW. Those who abandon PoW and switch to PoS have given up their grasp of the truth.

PoS ultimately comes down to choosing to trust “people”, the most untrustworthy creatures.

The key issue is that the person you choose to trust is almost certainly going to be biased and hypocritical.

In order to avoid being trusted by everyone and to avoid affecting the development of Bitcoin, Satoshi Nakamoto chose to hide his identity from the beginning and disappeared completely in the subsequent exposure incident.

In an email to Gavin Anderson on April 26, 2011, Satoshi Nakamoto wrote:

“I wish you would stop talking about me like a mysterious figure, the media will just latch onto that and make Bitcoin into a pirate currency. Maybe instead, put it on open source and give more credit to your developers; it helps motivate them.”