Why did Ripple's co-founder spark community protests by investing $5 million to "green" Bitcoin?

On Tuesday, Ripple co-founder Chris Larsen launched a campaign to change the Bitcoin code to reduce Bitcoin's environmental impact, which caused great controversy in the crypto community. He is working with Greenpeace and Sierra Club and funding $5 million for a campaign called "Change Code Not Climate" to call attention to Bitcoin's energy use.

The goal, Bloomberg reported, is to pressure the Bitcoin community to transition from electricity-intensive proof-of-work mining to a proof-of-stake system that uses less energy.

At first glance, Larsen’s proposal is attractive. The environmental impact of proof-of-work mining is perhaps Bitcoin’s most substantial drawback and a persistent headwind for public perception of cryptocurrency as a whole. For example, rhetoric of environmental damage has fueled significant, and sometimes misplaced, hostility toward NFTs in the art world.

But industry leaders and observers consider the proposal to be highly risky, completely impractical, and possibly even ridiculous. What’s more, Larsen’s motives for making the proposal are highly questionable: after all, as the co-founder of Ripple, he has been arguably hostile to Bitcoin for the past decade.

Great risk

The first problem with Larsen's proposal is that converting Bitcoin to a proof-of-stake mechanism would involve incredible risks. The change would be so fundamental that it probably couldn't be accomplished through a traditional "hard fork," in which some members of the network use incompatible versions of the Bitcoin software. Hard forks have been used before to create modified versions of Bitcoin, most notably the split of Bitcoin Cash from Bitcoin in 2017.

But Bitcoin Cash and similar forks only change already defined technical parameters in the proof-of-work system, such as the block size. The proof-of-stake system operates on a fundamentally different security architecture, so a proof-of-stake-based Bitcoin would likely involve a redesign rather than changing existing parameters. This would be more than just a "fork," but a much more complex project.

Ethereum’s transition from proof-of-work to proof-of-stake shows what this might look like. Ethereum 2.0 will not be a direct continuation of the current Ethereum chain, but rather a managed transition to a new system. The new system’s “beacon chain” has been running in parallel with Ethereum 1.0 for years, and the merger of the two has been carefully managed by a strong core team of Ethereum companies and developers.

One of the reasons why it is almost impossible for a similarly consistent and influential organization to emerge to manage this transition of Bitcoin is the distrust of the security of proof of stake itself. Bitcoin advocate Gigi said on Twitter: "Proof of stake is not only insecure, but also completely meaningless. Without proof of work, any system will become a political means."

Once a major network change occurs, the interests and goals of many people may diverge dramatically. For example, Bitcoin miners spend millions of dollars to buy specialized chips called ASICs (application-specific integrated circuits) for proof-of-work mining, and are unlikely to support a proof-of-stake switch.

Furthermore, truly transitioning Bitcoin to a new paradigm would likely require convincing all of those miners to stop extending the proof-of-work chain. This in turn would require convincing exchanges around the world to stop trading tokens from the proof-of-work chain — a nearly impossible task.

Fierce controversy

These realities help explain why Larsen’s proposal has been met with not only opposition from Bitcoin supporters, but fierce personal rejection. Like Twitter or Facebook, Bitcoin relies heavily on “network effects” — the more useful it is, the more people use it. While a proposal like Larsen’s is unlikely to convince every Bitcoin user to switch to a new proof-of-stake system, it could sway some of them and spark a “hard fork” in the community.

Such a split could weaken Bitcoin, and Larsen’s background appears to have fueled speculation about his true intentions. Over the past decade, Ripple has often seemed to argue that the XRP token created by its co-founder is a superior system to Bitcoin, and the company has sold more than $1.3 billion of the tokens to the public.

This led to a massive, ongoing battle with the SEC and left many Bitcoin supporters with lasting animosity toward Larsen and the entire Ripple organization, which many viewed as inherently deeply hostile to Bitcoin.

Ryan Selkis, founder of crypto data provider Messari, responded to news of the initiative by declaring that “Ripple executives are scumbags,” slamming Larsen’s initiative as lacking sincerity and suggesting that its real motive is to promote Ripple’s XRP token.

Prominent bitcoiner Jameson Lopp similarly questioned Larsen’s sincerity, noting that Larsen had not submitted a proposal to the Github website, which people use to suggest and implement changes to the bitcoin code.

Eric Voorhees, founder of crypto firm ShapeShift and an influential figure in the early days of bitcoin, also said Larsen’s call to change bitcoin’s code was unrealistic and doomed to fail.

“If I view Bitcoin as a competitor, then the best thing I can do is keep Bitcoin on this path… but it’s an unsustainable path,” Larsen said in an interview with Bloomberg.

At the same time, Larsen seemed to anticipate the hostility his proposal would be met with, and apologized to Ripple’s PR team for the amount of trouble it would cause them.

Ultimately, the backlash against Larsen’s proposal from Bitcoin supporters suggests that calling for a move to proof-of-stake will change nothing and will only deepen the rift between Ripple and Bitcoin supporters.