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Bitcoin uses Proof of Work for two things: one is to secure the blockchain with strong cryptographic signatures like a Merkle tree, and the other is to crown the validator which "mines" a solution as THE validator (dictator) who determines which transactions to broadcast in that block. If they blacklist your address (or charge large fees) and don't want to accept your transaction then maybe another validator will eventually accept it.

But why do we need Proof of Work for the second thing? What's wrong with Proof of Correctness as Ripple uses, or Delegated Proof of Stake as LISK uses, for example? Why are they considered "not decentralized" while Bitcoin is said to be "decentralized" despite the arms race that has caused a few mining pools in China to control more than 51% of the mining power in practice?

What is wrong with a community electing 101 random validators like with LISK for example? How can this be gamed to reduce people's freedom to transact or have their transactions confirmed? The worst thing is some address may be blacklisted by a few validators (eg under pressure from a government law) but the same can happen with bitcoin miners, since we know who they are. So what's the disadvantage of Delegated Proof of Stake?

Here are the advantages: less waste of electricity, faster consensus, and possibly more decentralization in practice.

If I am right and this doesn't have any serious disadvantages, it should be rather trivial to make a cryptocurrency with delegated proof-of-stake electing N (odd number) validators.

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Proof of Work is needed to inventivize miners to not fork and, if there is a fork, some metric for determine which fork is the real blockchain (assuming no consensus changes in the fork).

Proof of Work incentivizes miners to not fork (i.e. see someone else's block, ignore it, and create their own block at that height) because of cost. It costs resources in order to produce a fork and stick with it. If their fork has no value, then they are wasting money on something that is worthless. However with other consensus systems like Proof of Stake, there is no cost to make a fork. Making a fork does not cost anything as there are no resources for you to spend to make the fork. In some systems, you can make a fork and still be mining/staking/minting/whatever on the original chain at no extra cost and no opportunity cost.

Proof of Work also provides a metric to determine which chain is the correct chain. Given two blockchains with the same consensus rules, the one with the most work (the sum of the difficulties of all of its blocks) is the one that is considered "the blockchain". In other consensus systems like Proof of Stake, no such metric exists for determining "the blockchain". This results in centralization as someone or something is needed to say "this blockchain is the right one". In some coins, a signer (usually the developer) must sign all blocks for the block to be considered valid, so that signer determines what "the blockchain" is and is a point of centralization.

  • Sorry, I fixed up the wording in my question. I didn't mean the miner is the ONLY validator, just that it is the validator that chooses which transactions to include in the broadcast of that block! Please, can you update your answer to reflect my change? – Gregory Magarshak Sep 13 '17 at 3:30
  • Edited. Your change does not really effect my answer. – Andrew Chow Sep 13 '17 at 3:33
  • So with LISK for example you have 101 validators that others vote for, delegated proof of stake. Are you saying that this system is more susceptible to forking than Bitcoin? In practice, after the arms race Bitcoin has only a few mining pools that control things and so a fork has already been done - Bitcoin cash. And more to come. – Gregory Magarshak Sep 13 '17 at 5:21
  • Yes, LISK and other coins using some sort of Proof of Stake are more susceptible to malicious forking. Whoever is the one to mint/forge a new block (e.g. in LISK the current delegate) can create two blocks and thus create a fork. However that person can continue to mint/forge on both forks of the blockchain. In Bitcoin with PoW, that is impossible. You can either point your hardware and mine on one fork. There is no way to mine both simultaneously as you can with PoS systems. – Andrew Chow Sep 14 '17 at 4:42
  • If one of the 101 delegates creates a fork, how will they broadcast it to the others? If they broadcast different things to different people then their broadcast will simply be IGNORED in the consensus protocol. – Gregory Magarshak Sep 14 '17 at 20:20

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