There is much discussion on the differences of Proof of Work (PoW) versus Proof of Stake (PoS) and Delegated Proof of Stake (DPoS), with the current trend leaning towards the staking varieties. I believe this may be an wrong direction, and that Proof of Work may outlive PoS/DPoS coins in the long run.
Broadly speaking, Proof of Work means that in order for a block to be mined the miners need to perform a computational task that generally costs a lot of power (electricity) to complete. Proof of Stake takes the computational element out of the equation and replaces it with a mechanism where you lock your coins down and operate a node and receive some sort of reward/interest for doing so. Delegated Proof of Stake works similarly, except that Delegates (or Witnesses in the case of Steemit) are chosen who perform the staking and operating of nodes.
The benefits of PoS are clear: There is no excessive energy consumption, and with an incentive to hodl there is less fluctuation in the price as there will be less sellers. Especially the last part is why some coins have had massive successes: who doesn't want to hold a coin that pays them for holding it?
In Proof of Work coins, however, there is a clear cost involved for creating a new coin. Part of the price of a Bitcoin is because it costs X amount of dollars in electricity to create a new Bitcoin. This sets a base cost: Nobody will sell for less than the production cost. One might say that Bitcoin isn't backed by gold or oil or a bank, but it is backed by the electricity that was produced in creating it.
PoS/DPoS coins have no such base level production cost associated with them. They operate 100% on the assumption that 'it has value because people believe it has value' which is true to some extent, but it carries significant risks if the perception of the value of the coin changes. A better competitor could come by, for example, and if people left the old currency to flock to the new currency the whole house of cards could simply come tumbling down with nothing left to back it. PoS is backed by the coins that are locked in; one could say Dash is backed by the amount of Dash locked up in masternodes. However, if the value of Dash is backed by Dash then it is truly not really backed by anything except public perception of the worth of Dash. Whereas a PoW coin will always have a base cost associated with it - even if the popularity of Bitcoin should lower I cannot fathom a miner willing to sell a Bitcoin for less than the production cost.
Additionally, I feel that PoS/DPoS opens the door for centralization more so than PoW. Those with wealth will be able to accumulate more wealth and control. I see no reason why any PoS coin would not, eventually, turn into a centralized one-conglomerate-coin where one party or group owns and controls the majority of the network. The only thing necessary is to simply 'buy in'. Just like how one big corporation could swallow another, a corporation could simply buy up the entire supply of a crypto over time. The more they have, the more they control the network.
In DPoS this effect might be worse. People on Steemit love it, because Steemit uses DPoS, but I have serious doubts about DPoS. It may be more effective/powerful because the nodes are running better hardware, but I cannot see how centralization benefits when you lower the amount of people involved in running the network. Delegates are chosen, but the way they are chosen is very flawed: Who here really knows what the witnesses they voted on do? Isn't DPoS essentially the same as our current political system, where we choose 'delegates' to rule over us? How good is that going? It introduces a corruption level just as with any other chosen delegate system. Here on Steemit too, we have had Witnesses who turned out to be corrupt already.
PoW on the other hand, always costs energy. It is somewhat centralized as well, yes, but mostly because electricity is cheaper in one place in the world than another. I believe this is not a problem of PoW, but a problem of ours and perhaps the answer is not to seek a different method but instead fix the problem of divergence in electricity cost worldwide. After all, PoW is fair in the sense that it costs as much electricity here as it does elsewhere.
In the end, people often ask 'What is cryptocurrency backed by?' and even though us crypto veterans nowadays assume the value of crypto, I believe it is wise to look back at that question from time to time. Because it matters. When times get rough, and uncertainty takes root, a crypto exodus begins, I believe it may be the PoW coins that survive. Simply because they are backed by the cost of the electricity that went into creating them.
To those who feel Proof of Work is bad for the environment and wasteful, I would like to finish this off with this video of Andreas Antonopolous, explaining eloquenty as ever why this fact is very much misrepresented:
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