SEC Chair Gary Gensler has informed the Senate that an Ethereum ETF is likely to be approved this summer. This news underscores the growing regulatory focus on different cryptocurrency technologies and their implications for the market. As discussions around the approval of new financial products continue, the debate between Proof of Work (PoW) and Proof of Stake (PoS) mechanisms becomes increasingly relevant

JUST IN: 🇺🇸 SEC Chair Gensler tells Senate that Ethereum ETF likely will be approved in the summer. pic.twitter.com/EpDKggOceP

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Jason Lowery has argued for the past 2 years that PoW coins are backed by tangible energy, making them inherently valuable, while PoS coins are akin to fiat currencies, which can be easily manipulated.

Proof of Work: Backed by Energy

Proof of Work, the consensus mechanism used by Bitcoin, requires miners to solve complex computational puzzles, which involves significant energy consumption. This process not only secures the network but also ties the value of the cryptocurrency to real-world resources. According to Jason Lowery, “Proof of Work coins are backed by energy,” which he believes gives them intrinsic value and resistance to manipulation.

Proof of Stake is Susceptible to Manipulation

In contrast, Proof of Stake relies on validators who hold and stake a certain amount of cryptocurrency to propose and validate new blocks. Lowery points out that this method can be easily manipulated. For instance, if a single entity gains control of a majority stake, it could potentially dominate the network.

He explains, “If someone controls 60% of all coins, they can have far more than 60% of the stake that’s being used in validators”​ ​. This centralization risk is likened to the problems seen with fiat currencies, where central authorities can print unlimited amounts of money.

Lowery emphasizes the dangers of PoS in a world with rampant fiat currency printing, suggesting that states or large entities could print money to buy up stakes and control the network. This, he asserts, undermines the decentralized ethos of cryptocurrencies. “There’s nothing physically preventing you from just printing all the money to buy all the stake to gain the control authority over the ledger,” he states, highlighting the vulnerability of PoS systems.

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