PoW Isn’t Dead! Kaspa Rally Demonstrates Renewed Interest in non-Bitcoin Mining
Proof-of-work mining isn't just for Bitcoin. Photo by Taylor Vick on Unsplash.
Key Takeaways
- Most people associate Proof-of-Work (PoW) mining with Bitcoin.
- But BTC isn’t the only PoW crypto in the game.
- Kaspa (KAS) has surged 15% in the last week and is up 50% since the beginning of the year.
When Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism in 2022, it was hailed as a landmark moment in the history of crypto that ushered in a new era of more efficient blockchain design. But two years, later, far from disappearing, PoW systems continue to thrive.
Perhaps it isn’t surprising that the original PoW stalwarts – Bitcoin, plus its forks and clones – are still going strong. Miners have a significant influence on these blockchains and there is no incentive for them to transition to PoS as Ethereum did. However, the meteoric rise of Kaspa (KAS) in recent years needs a little more explaining.
Why PoW Didn’t Disappear
After Ethereum’s move to PoW, an event known as the Merge, the network’s energy consumption was cut by as much as 99% – a reduction that was widely celebrated by environmentalists.
Around the time of the Merge, PoW systems were frequently derided as old-fashioned: an inefficient, energy-intensive hangover from the early days of crypto. Debates around the pros and cons of different PoS alternatives became trendy and there were even calls for Bitcoin to make the transition too.
But in the end, Bitcoin stuck with its original consensus mechanism. As did Litecoin, Bitcoin Cash and Dogecoin. In each case, arguments in favor of PoS were rebuffed on technical, economic and ideological grounds.
Technical Hurdles
For starters, although theoretically feasible, switching Bitcoin’s consensus algorithm would require rewriting the protocol’s codebase from the ground up. Given Bitcoin Core developers’ historical resistance to significant design changes, building support for such an upgrade would be nearly impossible.
Bitcoin would also face the same resistance from miners that Ethereum did before the Merge was finally pushed through by other stakeholders.
Finally, many Bitcoiners are ideologically committed to the Proof-of-Work model, which they perceive as more secure than Proof-of-Stake alternatives.
The Proof-of-Work Security Paradigm
The global network of miners provides Bitcoin with an important physical base: a material infrastructure that anchors the cryptocurrency’s value in something tangible.
Without this physical grounding, Ethereum is simply more ethereal. Perhaps because of this, despite being more functional, the dollar value of all modern PoS cryptocurrencies combined remains lower than Bitcoin’s.
However, although the physical network of PoW miners remains an important part of Bitcoin’s appeal, such heavy infrastructure is inevitably difficult to scale.
Compared to second-generation blockchains, Bitcoin’s throughput is abysmal. Workarounds like the Lightning Network go some way toward solving this challenge. But many users have long since abandoned the platform’s original premise as a peer-to-peer payment network in favor of the “digital gold” store of value narrative.
Kaspa: A More Scalable PoW Crypto
Positioned as a more functional, scalable PoW blockchain, Kaspa was launched in 2021 and its native token KAS has been climbing up the ranks of top cryptocurrencies ever since.
While it borrowed many design elements from Bitcoin, Kaspa also introduced new features aimed at overcoming some of the issues encountered by traditional PoW systems.
The new platform really started to gain traction in late 2022 and KAS emerged as one of the breakout cryptocurrencies of 2023, registering gains of around 2000% throughout the year.
After the Ethereum Merge had largely shifted focus to Proof-of-Stake, Kaspa’s success in the last 2 years has dispelled any notion that the Nakamoto Consensus is old-fashioned.
After the Bitcoin mining giant Marathon Digital revealed that it has allocated a portion of its hash rate to mining KAS earlier this week, the cryptocurrency embarked on a further rally, dodging the prevailing bearishness that has characterized the rest of the market.
The PoW Rennaisance
With major players like Marathon on the lookout for other mining opportunities besides Bitcoin, there has been a renewed interest in PoW coins, which are having something of a renaissance.
The argument that Bitcoin and maybe a few other PoW coins should build a large enough network effect to force out upstart rivals has so far proven to be untrue.
Alongside Kaspa, tokens like eCash, Conflux and Ravencoin continue to push the technology forward. Active communities of developers are advancing new PoW mechanisms that combine the technology’s material security base with the smart contract functionality more commonly associated with PoS chains.
In 2024, new PoW systems have followed wider trends shaping the crypto space, with a string of PoW meme coins, AI tokens and GameFi cryptocurrency projects choosing to validate their blockchains with miners rather than stakers.
The arguments in favor of proof-of-stake are no less relevant today than they were at the time of the Merge. But the continued relevance of the Proof-of-Work model proves that efficiency isn’t the only factor in play.
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