Electric Coin Co (ECC), the company behind the Zcash ecosystem, has hinted at moving the privacy cryptocurrency from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism.
Zcash founder Zooko Wilcox made this known in a recent blog post where he shared his opinion on why such a transition will benefit users.
Wilcox Believes PoS will Make ZEC More Valuable
Zcash (ZEC) is a privacy-focused coin that currently runs on proof-of-work as it was forked from Bitcoin. PoW involves miners who compete to solve mathematical puzzles using intensive energy for newly minted coins as a reward. However, PoS is lighter and only requires validators who deposit their coin as collateral to verify transactions and secure the network.
Wilcox argues that moving Zcash to PoS will reduce downward pressure on the crypto, given there will no longer be miners who are bound to sell their coins to recover operating costs. He says that staking would add utility to ZEC and also encourage users to eventually become long-term holders.
The plan to transition ZEC to PoS also comes amid concerns around the intensive energy usage in PoW, which the court of public opinion believes endangers the planet.
Wilcox also mentions it was easy to maintain the security of a network with PoS as offenders or violators can be published without affecting the overall network.
While there are many who prefer PoW, I believe PoS would make ZEC more valuable to more people! The benefits are great, and they far outweigh the drawbacks and risks.
Zooko Wilcox, Zcash founder
Community Remains Unconvinced
Some people, including Justin Ehrenhofer, are not in support of this. In a post on reddit, the crypto compliance analyst opined that transitioning ZEC to PoS indicates “they prioritise wealth over privacy“.
Ehrenhofer claims that 20 percent of the block rewards for the first four years were allocated to the founders. Thus, staking this massive number of coins will give them an advantage to earning new block rewards. He also notes that staking could impact the coin’s privacy.
It is not clear that shielded staking will be supported. If only transparent staking is supported, or if shielded funds must publicly share significant information to stake (which would make them more like transparent funds in effect), then Zcash will forever be largely transparent, not private.
Justin Ehrenhofer
In one of a series of tweets, Luxor CEO Nick Hansen also argued against the move, saying staking is a major centralising force:
What You Must Know
The ECC hasn’t yet finalised on transitioning Zcash to proof-of-stake. This is more like a proposal to understand which consensus mechanism the community believes adds more value to the Zcash network. It’s left for the community to decide whether the proposal should be passed.
Whether Zcash itself changes is determined by whether the Zcash community chooses to run that software.
Zooko Wilcox
Regardless of the contradictions, there are already a good number of cryptocurrencies running on proof-of-stake. These include Tezos, Algorand, Cosmos, Cardano, and so on. The development also comes at a time when Ethereum is preparing to move to PoS.
Crypto News Australia revealed this week that a major upgrade “London“ hard fork would be activated on the blockchain on August 4, preparing the path for Ethereum 2.0, which is based on PoS.
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