Vitalik Buterin has responded to community concerns about the network transition from PoW to PoS. Buterin highlighted the need and benefits of this change, citing concerns about the centralization of PoW. Despite Ethereum’s successful transition to PoS, regulatory scrutiny persists, particularly from the SEC.
Ethereum co-founder Vitalik Buterin has responded to community concerns about the network’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS).
Over the past week, Ethereum’s PoS transition has faced scrutiny from community members, particularly amid concerns that it prompted increased scrutiny from US regulators.
The co-founder and main developer of Ethereum highlighted that the goal for the network was always to use a Proof-of-Stake (PoS) consensus algorithm, and that the fact that it started from Proof-of-Work (PoW) It was something that was considered transitory at the time.
Was the Transition from Ethereum to Proof-of-Stake a Mistake?
Since its launch in July 2015, Ethereum operated with a PoW consensus mechanism similar to Bitcoin. In PoW, participants compete to solve crypto algorithms, requiring considerable computing power and energy to validate each block on the blockchain.
Concern over the environmental impact of PoW cryptocurrencies led authorities in several countries to advocate for their ban in favor of more sustainable alternatives. In September 2022, Ethereum developers began a major transition known as “The Merge,” moving to a PoS infrastructure.
This monumental change replaced miners with stakers, addressing environmental concerns and aligning with Ethereum’s long-term goals. Vitalik Buterin underlined the importance of this transition, highlighting the centralization of PoW and its temporary nature before the implementation of PoS. Buterin states the following:
“PoW was also quite centralized. It was just not talked about as much, because everyone knew it was only a temporary stage until PoS.
And that doesn’t even get into how we probably mostly avoided ASICs only because the upcoming PoS switch meant no incentive to build them.”
Hand in hand with these statements, Buterin published a graph showing the distribution of mining activity for the Ethereum network under the PoW system, showing that only Spark Pool, Ethermine and F2Pool together capitalized 65% of the processing power.
Since the transition to a PoS chain was completed, Ethereum has witnessed an increase in the number of validators and staking demand. More than 25% of the circulating supply of ETH has been staked, improving network security and providing returns to participants.
Concerns about PoS
Since the operational switch to PoS was made in September 2022 with The Merge, a significant sector of the Ethereum community has criticized the change to the consensus algorithm for various reasons, mainly considering concerns about the possible centralization of block processing in network.
Another of the harshest criticisms had to do with the mining population whose devices could now not be used to mine ETH. Following the arrival of The Merge, groups of miners pushed to implement and continue supporting an alternate version of the Ethereum network that operated under PoW, but despite some traction for a few months, the ETHPOW initiative failed to maintain enough support as to be considered a viable alternative.
More on the Ethereum Transition
Ethereum staking has drawn scrutiny from the Securities and Exchange Commission (SEC). SEC Chairman Gary Gensler suggested that PoW cryptocurrencies that allow staking could meet the criteria for securities under the Howey test.
The uncertainty surrounding the regulatory status of Ethereum remains relevant, impacting compliance efforts for entities dealing with ETH.
By Audy Castaneda
