It’s been a couple of months since Ripple and Greenpeace, and a handful of other environmental organizations, showed they have no clue why Bitcoin is special. Announced in March 2022, the “Change the code, not the climate” campaign attempts to pressure influential Bitcoiners into supporting a switch from the energy-intensive and proven proof-of-work consensus mechanism to the still-experimental proof-of-stake.
To justify its existence, the campaign leans heavily on Ethereum’s ongoing transition to PoS. And, as the day Ethereum’s miners switch off for good approaches, it’s a given that the anti-PoW crowd will ramp up its pressure on Bitcoin.
Proof-of-Stake Vs BTC’s Proof-of-Work
Boiled down, the rationale is “if Ethereum can do it, so can Bitcoin.” Yet, this misses the point entirely. Above all, Bitcoin’s supporters value its predictability and adherence to sound monetary principles. All of that becomes suspect if fundamental changes are made to its codebase.
Much has been written about PoS and PoW, and their tradeoffs. While some claim PoW offers insurmountable security, others claim that PoS achieves the same at a fraction of the energy consumption. The debate rages on, and I’m not going to rehash the arguments here. Instead, I’d like to focus on something much more fundamental to why PoS is an ill fit for Bitcoin and its value proposition as the planet’s soundest money – its lack of historical precedent.
Predictability breeds trust
Money is a system of trust. Without the widespread belief that this lump of gold, £20 note or even a handful of seashells can be exchanged for someone’s time, products or ideas, these collections of molecules are just that. It’s us as humans that impart monetary value onto something, and history has shown time and time again that a monetary system quickly falls apart without trust.
Would gold have been prized as the planet’s premier money, transcending space, time and cultural differences, for the last 5,000 years if its molecular structure periodically shifted? Of course not. Gold doesn’t change and remains trusted. In nations with the most unpredictable monetary policies struggling against erratic economic conditions, trust in currencies and, therefore, the currencies themselves collapse entirely.
Trust doesn’t emerge overnight either. BTC has been around for 14 years with more than 99% uptime and is still not universally trusted. Although many changes have been made to the protocol (after lengthy debate and finding consensus at the network level), its key characteristics – namely its finite supply protected by the clout of the world’s most powerful computing network – remain the same.
Changes, particularly those lacking historical precedent, often invite doubt over the future. Imagine a Fortune 500 company fired its successful CEO and brought in a complete unknown. It doesn’t take a genius to predict the impact on its share price. Now imagine an asset’s entire value proposition is based on its predictability. That’s where BTC is at.
“Ultrasound money” is a farce
There’s a popular meme that circulates among Ethereum’s staunchest supporters. It’s a belief that anything designed to make “number go up” – i.e., make the price rise – positions ETH as a sounder form of money than BTC, perhaps even an “ultrasound money.”
It’s easy to see why the meme is popular – if BTC is celebrated as sound money, surely our “ultrasound money” is better. Yet, it makes absolutely no sense.
BTC is considered sound in part because of its finite supply. However, the hard 21 million cap means nothing if those using it (and yes, simply holding it is using it) have no faith that it will remain this way. If BTC were to abandon its tried-and-true consensus mechanism for one that has not had 14 years of battle testing, why should its users believe its finite supply isn’t the next feature to go? BTC’s resistance to such changes is integral to its classification as sound money.
Proof-of-Stake and Ethereum
ETH, on the other hand, is not sound money. Its total circulating supply and issuance are difficult to quantify, and mechanisms like EIP-1559’s fee burn only make it more unpredictable. If no one uses Ethereum, its issuance is inflationary. If many users make transactions, its issuance may be deflationary. The very fact that no one can definitely classify its monetary policy – which apparently remains subject to change – means it is not sound money, let alone “ultrasound money.”
Whatever you think about them, it’s telling that El Salvador, MicroStrategy and others went big into BTC and not ETH, XRP, SOL or any other crypto. BTC isn’t trying to be a world computer. It isn’t trying to serve as a platform for legally suspect applications. These goals, possibly admirable in their own right, require an entirely different network, and dramatic changes are to be expected.
BTC, on the other hand, is on its way to establishing itself as the soundest form of money ever to exist. Experimental consensus protocols are completely at odds with its mission.
Move slow, break nothing
Does PoS currently being a poor fit for Bitcoin mean ETH is worthless or that the “number go up” mechanisms Ethereans champion are bad or undesirable for Ethereum? Absolutely not. The argument makes no comment on what is suitable for a network with smart contract capabilities at the base layer.
It also doesn’t mean that PoS itself is necessarily flawed. There are strong arguments on both sides of the debate, but the fact that there even is a debate means PoS is not suitable for Bitcoin today. It may well be appropriate tomorrow, but attempts to strongarm code changes risk destroying everything that makes BTC special.
For now, PoS in the form Ethereum is implementing is untested at scale. There are numerous variations of delegated proof-of-stake currently live, but no blockchain worth tens of billions uses quite the same system as Ethereum is moving toward. It’s also hellishly risky to switch to PoS from PoW on a live network. That’s why Ethereum’s merge is taking so long. It’s been an unstable transitionary period for ETH, while BTC’s appeal stems directly from its stability.
Proof-of-Stake and BTC: Misunderstanding or malintent?
Given the fact that the “Change the code, not the climate” campaign is so fundamentally at odds with what Bitcoin users find to be the network’s core value proposition, one has to raise the question: Why rock the boat?
On the surface, you have environmental groups that share a tunnel-vision view on energy use – “if it uses electricity and we don’t like the application, it needs eradicating.” Given that Greenpeace and the Environmental Working Group see no value in Bitcoin anyway, potentially killing what makes the network special in order to forward their agenda poses no issue. For them, policing energy based on what they subjectively hold to be useless or detrimental is perfectly acceptable.
Now, we come to Ripple. Ripple, of course, is the company behind the XRP cryptocurrency and presumably believes its own stab at digital money has a lot to gain from Bitcoin’s demise. A conspiratorial take? Perhaps. But, given Ripple’s own actions in the crypto industry, which have always revolved around cozying up to existing financial institutions and providing them the tools to protect the status quo, suspicions are warranted.
We can speculate as to Ripple’s true intentions, but one thing is certain – similar attacks on Bitcoin will get louder as Ethereum’s “merge” approaches. And make no mistake, they are an attack against Bitcoin.
A video on the “Change the code, not the climate” website states:
“The cost to Bitcoin is almost nothing.”
Yet, hundreds of millions of Bitcoin users, myself included, disagree – the cost to Bitcoin is everything.
About the Author
Rick Delaney is a Senior Crypto Analyst @OKX. He is an ex-poker player turned writer with an academic background in politics and linguistics. He first discovered Bitcoin in 2013 while searching for alternate ways to fund online casino accounts. After reading deeper, BTC’s promise to divorce money from corrupt central bankers struck a chord within him. A few years later, he got his start in the crypto space working for media publications, including BeInCrypto, before joining OKX as the exchange’s senior content writer and crypto analyst. His fields of interest span all corners of the industry, but truly decentralized systems are what attracted him, and it’s here that his real passions remain.
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