2021 PoW Blockchain Wars: Bitcoin vs. Elon "Dogefather” Musk

A couple days ago Elon Musk declared war on the Bitcoin community. Although he announced that his company Tesla will stop accepting BTC as means of payment for its cars simultaneously he is promoting another electricity-consuming PoW blockchain: Dogecoin. In parallel Elon’s SpaceX is blowing massive amounts of CO2 originating from fossil fuels into the air with every rocket launch not even considering the production costs of the rockets and cargo. Is Elon Musk possibly only pumping Dogecoin because he was late on Bitcoin? Technologically, for everyone who reads the source code, there really isn't a big difference between Bitcoin and Dogecoin since Dogecoin is a copy of bitcoin with a few different parameters and a cute dog as a logo.

Elon Musk claims that Bitcoin mining is consuming too many fossil fuels, especially coal. But as Michael Saylor and many others pointed out: Bitcoin and also Dogecoin mining is probably done with a very high percentage of renewable energy. Simple economics push Bitcoin and Dogecoin miners to consume the cheapest electricity possible. Soon most of the cryptocurrency mining will probably be happening via solar in remote places since solar became the cheapest source of electricity. And if Bitcoin was a country it would be one of the leaders of consumption of renewable energy.

Some definitions:

Definition “blockchain”: public open source cryptographic time-stamping service, mainly used to secure transactions of cryptocurrencies.

Definition “Proof of Work”: elegant mechanism which requires to spend specific computational resources in a way that its easy to verify for bystanders without that they need to do the same amount of work. Eventually every PoW mechanism drives the creation of ASICs (application specific integrated circuits).

What many people and even exchanges don’t understand: Security of mined transactions in PoW blockchains is a linear function of the sum total of PoW done after the transaction has been mined into a block. Thus, the more blocks get mined after the transaction’s confirmation, the higher the security of that transaction. Roughly, this also means that transactions get more secure the more time has passed.

Total worldwide gross production of electricity in 2016 was 25,082 TWh. Sources of electricity were coal and peat 38.3%, natural gas 23.1%, hydroelectric 16.6%, nuclear power 10.4%, oil 3.7%, solar/wind/geothermal/tidal/other 5.6%, biomass and waste 2.3%. (source: Wikipedia)

As of mid-May, electricity consumption for Bitcoin’s PoW is hovering around 150 terawatt hours per year. (https://cbeci.org/)

150 TWh / 25,000 TWh = 0.6%

Bitcoin’s PoW consumes 0.6% of the world electricity production. That's not enough! Let me explain you why…

For doing the Proof-of-Work you need resources: mainly Hardware and Electricity and as well as management and rent.

Bitcoin PoW blockchain is not only securing the Bitcoin blockchain. One and the same PoW mechanism can secure many blockchains via merge-mining. Namecoin (first Altcoin still in existence) and Rootstock (Ethereum style smart contract blockchain) are mergemined with Bitcoin.

As of 15th of March 2021:

$919,009,970,863 Bitcoin marketcap

$68,502,504,421 Dogecoin marketcap

$21,748,287,094 Litecoin marketcap

Total Marketcap secured by PoW is sum of all coins marketcap and other digital assets secured by the PoW.

There is probably nothing better for the global society than to secure THE global ledger with 3–5% of the world electricity production. At this level it becomes almost impossible to do an attack on the blockchains and digital assets secured by this type of PoW and it can secure a huge amount of blockchains all with their own transactions and driving the cost of transactions in kWh down. One and the same PoW mechanism will be able to secure many chains in parallel. Each of them will be able to have a tree of childchains. All chains will be able to communicate with each other via cross-chain atomic swaps. This way the cost for transactions will go down and if we, as a global society, can secure all our identities, wallets, transactions, digital assets and our rights via spending some percent of the world electricity production on the security of the ledger. Judge yourself if you find this a good idea idea and reply in the comment section :)

What is a 51% attack?

So called 51% attacks are reality in cryptocurrency land. Someone who controls more than the simple majority of the PoW power invested into the blockchain can mine on a hidden chain fork while sending coins one the public chain to an exchange. Next, the attacker sells the coins on the exchange for some other cryptocurrency and withdraws his new purchase. Then he releases the hidden chain where he kept all coins (not sending them to the exchange) to the public. The public accepts the longer chain as the correct one, since it is longer and has more PoW accumulated because the attacker had the majority of the mining power (even if just temporarily rented for the attack).

Important rule of all PoW blockchains: The higher the transaction value, the longer the recipient should wait for accepting the transaction as immutable. This is something what even many exchanges don't understand like the attack on æternity blockchain did show. Example: If one transfers only a hundred USD in crypto and the block-reward is in the thousands, then its safe to accept them after a few blocks. If one transfers millions in crypto one needs to wait ideally hundreds if not thousands of blocks to be safe against a 51% attack (if the block-reward is the same). One and the same attacker usually targets several exchanges simultaneously. If one wants to transfer billions via BTC one really needs to have a very good relationship to miners, otherwise his transaction is insecure for a longer period of time.

Why is Dogecoin way less secure than Bitcoin or Litecoin?

Bitcoin is mining 6.25 BTC every 10 minutes. 50k USD * 6.25 / 10 = 31,250 USD per minute (this is without fee reward which adds around 8% to this)

Dogecoin is mergemining with Litecoin via “Scrypt” PoW. Litecoin is mining 12.5 LTC every 2.5 minutes. 311 USD * 12.5 / 2.5 = 1555 USD per minute (plus fee reward of 0.4%). Dogecoin additionally mining 10,000 Doge every minute. 10k * 0.5 USD = 5000 USD per minute. Dogecoin seems to be currently the dominant cryptocurrency for the Scrypt ASICs.

Bitcoin transaction security is around 1m USD per half an hour while Dogecoin and Litecoin security is only 200k USD for the same timeperiod.

The security of every PoW blockchain is always lower than the earnings for doing the PoW. Hardware manufacturers need time to produce the special hardware needed for doing the PoW. If cryptocurrencies were stable the resources spent on PoW would approach the earnings leaving just a small profit margin for the miners and driving them to become more and more efficient.

Since one needs special hardware (ASICs) to mine DOGE and because of the meteoritic rise of DOGE the hardware manufacturers haven’t been able to produce enough ASICs the security of LTC and DOGE is way lower than the resources spent on this. Profitability for mining DOGE and LTC should be extreme as well. Elon’s Dogecoin pump is making a few Scrypt miners very rich these days.

Further steps to secure the new PoW global ledgers and get most out of its PoW:

• Drive competition to have a multitude of hardware manufacturers of ASICs so that no monopoly or oligopoly develops.
• Have childchains in parallel. Each of them with additional child chains thus creating a tree of chains.
• Having a rolling checkpointing mechanism implemented like with æternity blockchain which does not allow block-reorganizations longer than k blocks. This works as long as the nodes can be online every k*blocktime.
• While Proof-of-Stake has been promoted by many new blockchain projects as the solution to the energy consumption it seems pretty clear: no matter what kind of "secure” PoS gets designed, it becomes more secure as soon as one adds PoW in a meaningful way to it. That's why æternity blockchain is working on PoW-PoS-hybrid "Hyperchains” consensus. Æternity hyperchains are making the best of both PoS and PoW worlds.
• Ultimate solution: have a Proof of Human instead of Proof of Work where a 1:1 mapping of humans to cryptographic keys gets created. This way we could enter a new global democracy. Combining pseudonym parties with blockchain technology seems to be one way of doing it.

@ Elon Musk: if you are reading this, let me applaud you that you are not promoting a Proof-of-Stake coin but an electricity consuming PoW coin like Dogecoin is. Since Doge is 99% the same like Bitcoin I believe that this blockchain war is quite useless. Bitcoin is the big brother of Dogecoin and wars between brothers are never good. Let’s have a chat!

The author Yanislav Malahov (Godfather of Ethereum) is an innovator working for almost 10 years in the field of crypto and blockchain technology. He is considered as one of the foremost experts in this field. He has (co)build and launched seven wallets, including the first Dogecoin browser wallet and very early decentralized applications in 2014. He registered the (probably) the first company in the world with cryptocurrency as base capital and without a bank account. For 5 years he is now working on æternity blockchain, a more scalable smart contract platform with build-in state channels for smart contracts, a naming system and a 10x more space efficient virtual machine in comparison to the EVM (Ethereum Virtual Machine). With the new hyperchains consensus he envisioned a better way of scaling for æternity and other blockchains.