Ethereum has distinguished itself as one of the few coins that isn’t concerned about “mooning” to maintain relevancy. But just how long can Ethereum remain secure without significant gains in price? The answer to that question depends upon If proof of stake comes to fruition.
Security in Proof of Stake vs. Proof of Work
In a proof of work system, it takes tons of electricity to validate a block. Validation is the confirmation of all transactions within a new block and those that came before it. This is how security works in tokens like Bitcoin and Ethereum, and because of how difficult it is, it works pretty well.
Instead of difficulty lying in the cost of mining operation, a proof of stake system interprets difficulty as obtaining large amounts of the currency. For example, if Ethereum ever moves to proof of stake, Eth holders will lock their assets up in exchange for a chance at validating a block. The more Eth that someone locks up, the higher chance they have of validating a block and receiving rewards.
As stated earlier, the Ethereum community has a reputation of not placing importance on the price, but in a proof of stake system, that notion will need to be thrown out of the window.
“If we build a network worth one dollar, then, to attack it someone doesn’t need to spend very much money. The more it costs to purchase enough Ether to meaningfully disrupt the system, the more secure it is for everybody building on top of this.” – Ameen Soleimani, Founder of Moloch DAO
How has Ethereum been preforming lately?
2019 was owned by Bitcoin. Everyone called Bitcoin’s 2017 bull run a “bubble” and investors seemed to want to prove that there is still life left in grandfather crypto.
Unfortunately, it has not so much been the case with Ethereum.
Bitcoin’s all time high is $20,000 and this year it almost recaptured those heights, hitting $14,000 before bears took control. Ethereum on the other had has seen all time highs of $1,400 and only made it back up to $350. In these terms, Ethereum was more overvalued than Bitcoin at their 2017 peaks.
Still, Ethereum’s lows were in the $90 range this year and with a $350 top, it’s pump was just shy of 4x, not too far away from Bitcoin’s gains.
After the highs of this year, Ethereum dropped much more quickly than Bitcoin, falling over 2x from its peak while Bitcoin is still maintaining more than half of its yearly high value. Crypto markets tend to move in tandem, but in order for outperform Bitcoin, it will need a rally on its own.
Will Ethereum be secure when Proof of Stake releases at the current price?
Ethereum is still worth billions of dollars as is, so changing to a proof of stake network won’t kill it. But still, it is objectively for an organization to come up with billions of dollars than to set up a mining rig bigger than everyone else’s combined.
If an organization wanted to accumulate Eth, it would be purchasing from potential stakers, where as mining equipment comes from manufacturers. This allows room for greater gains in power than in a proof of work system.
At the end of the day, the best thing for the security of Ethereum as a proof of stake system would be for more people to adopt the tech and the price to increase. As the price increases, it becomes harder for an organization to acquire a majority. As more transact with Eth, the price becomes higher.