Once upon a time, blockchain had a noble goal: decentralization. In the early days, it did just that: a worldwide community of people who, using their own equipment in their own homes, could contribute to a unique type of network by running nodes, generating blocks, and snatching control — technological, economic, even political — away from large, centralized entities such as governments, Silicon Valley mega-corporations, and ancient financial institutions whose motives were often greedy, dubious, contrary to the common good, and in some cases sinister. And in 2009, Bitcoin was born.

Bitcoin today, along with most other large blockchains using proof-of-work consensus, has largely failed to accomplish what it set out to achieve in this regard. In fact, they’ve become precisely what they were designed to avoid: functionally-centralized and inefficient havens for greed, dubious activities, and providing little benefit to society or business (although they’ve tried). This isn’t an article about what proof-of-work consensus is — there’s plenty of educational resources out there which explain that already, along with how proof-of-stake consensus, when implemented properly, avoids many of the insurmountable problems embedded in proof-of-work. Suffice to say, proof-of-work consensus ultimately favors the rich: those who are able to throw large amounts of money into high-end hardware and who can afford the large energy bills associated with running the aforementioned networks, leaving everybody else sickeningly tossed around in the turbulent and unpredictable waves of the modern crypto marketplace with no control whatsoever. As a result, massively-decentralized active participation in supporting Bitcoin and other proof-of-work chains such as Ethereum through mining has fallen into the hands of a few large groups who produce most of the blocks, and who have their own interests, rather than those which seeded blockchain in the first place, at heart. The days of you, an average reader with perhaps a decent laptop, a good internet connection, and an interest or passion for the technology, actually being in a position to mine Bitcoin, let alone play any significant role in the direction of the network and the fundamental societal changes blockchain promises to deliver, are in the distant past. For all intents and purposes, by holding a proof-of-work coin today, you’re participating in the system as much as someone holding $500 in cash is participating in the governance of the US financial system: in short, you’re merely an outside observer with zero control.

Does it matter? Well, it depends why you’re in blockchain. If it’s to make a quick buck by trading (which is essentially the only way to actively increase the value of your “investment”), or passively hoping that others will take steps to foment widescale adoption and increase the value of what you hold, then not really; proof-of-work is as good as anything else. But if you’re in blockchain for the reasons described in the opening paragraph — to decentralize control, to have your voice heard, to play a part in the network, to build something amazing, or to receive rewards for your efforts in supporting the network, no matter how large or small — then you’re in the wrong place with proof-of-work. And it’s worth remembering that blockchain security depends heavily on decentralization; when the network is in the hands of the few, security is greatly diminished — both technologically and in terms of how the network is governed.

Enter proof-of-stake. Rather than handing control to those who can afford to play, leaving all but the largest Chinese mining pools outside in the cold and completely powerless, proof-of-stake gives every owner control of the network directly in proportion to the number of tokens held rather than how many warehouses full of mining rigs they’re able to afford. A return to the original reasons why blockchain arose in the first place, and a resurrection of the power of massive decentralization.

The form of proof-of-stake utilized by Tezos is unique in that it allows you, if you meet the minimum staking requirement (which has recently been reduced to widen access rather than restrict it, something unheard of in the greed-ridden world of blockchain), to run a node from your home using the most basic equipment — your laptop, for example. There’s no need for you to blow a hundred grand on a specialized mining rig to take part; participation is as simple as setting up BakeChain.

And if that’s not your cup of tea, Tezos makes it even easier: you can delegate your tokens, no matter whether you hold ten or ten million — completely securely, as they never leave your wallet — to one or more bakers who’ll do the job for you in return for a very modest fee (typically around 10% of your share of the baking rewards). It’s a process that takes a minute or two to accomplish, and requires absolutely zero effort thereafter. Your XTZ are baked, securing the network, and in return you receive your proportional share of the XTZ earned by the baker to whom you’ve decided to delegate, less expenses. And you’re able to participate (either by each baker asking the people delegating their XTZ which way to vote, or by choosing a baker who votes in the manner you prefer) in blockchain governance, giving you a voice in how the network develops over time.

Are you getting the picture now? Not only is proof-of-stake a better, more efficient way of validating a blockchain, it’s one which stays true to the fundamentals. It returns power to everybody, not just the big boys. Furthermore, there’s a rather positive side effect to this immense decentralization: proof-of-stake encourages stability, technological progress, and engenders a sense of ownership and pride in the network, rather than treating it like a way to make a quick buck at the expense of everybody else via incessant trading and market manipulation. The “tragedy of the commons” (look it up) doesn’t exist in the Tezos proof-of-stake system. And guess who likes stability? Business.

The big chains recognize this. They see how centralized they’ve become (from a governance and operations standpoint) and are desperately trying to upgrade to proof-of-stake or to implement workaround solutions built on top of their old-fashioned proof-of-work setups to make them look more modern. In my opinion, such radical changes are almost unachievable from a technological standpoint, rather like putting wheels on a horse and calling it a car in a desperate attempt to compete with the invention of actual cars, a battle which was lost a century ago. Tezos — built from the ground-up on proof-of-stake — is the sensible and secure way forward. There’s been a fundamental shift in underlying blockchain technology since Bitcoin was first described by Satoshi, and all but the most astute observers have completely missed the benefits of proof-of-stake, instead creating copies of Bitcoin or relying on what was once tried-and-tested technology, but which is now an albatross around the neck of many a proof-of-work blockchain.

In reality, most of us aren’t going to bother with running our own nodes and baking our own XTZ. We either don’t own the minimum number of tokens (10,000, currently in the process of being lowered to 8,000 thanks to Tezos’ on-chain governance in which all Tezos holders had a say), or we don’t have the time or inclination. Yet passivity doesn’t mean missing out with Tezos. It’s remarkably simple to delegate to a professional baker who’ll do much the hard work while we get on with our lives.

So who are these professional bakers? Could you run a bakery yourself? (TL;DR: yes.) Bake’n’Rolls has kindly offered to let us take a look behind the scenes at a high-end Tezos bakery — the equivalent of a large Bitcoin mining pool. Keep that in mind as you read on, because the similarities between the two are dramatic.

Zed, the co-founder of Bake’n’Rolls, operates one of the main Tezos baking groups from an office in Kyiv, Ukraine. The team consists of himself, his co-founder who runs the technical side, and some IT support staff who maintain internet connectivity and manage the hands-on running of the baking equipment. The baking rig itself (and again, bear in mind that Bake’n’Rolls is a hardcore, high-end bakery, the equivalent of a massive Bitcoin mining setup) consists of just two dedicated HP Enterprise servers (one for baking, one for testing and backup purposes), a Fortinet router, and the necessary power supply equipment to ensure that the service runs 24/7. That’s all. No air-conditioned warehouses in Venezuela; just the rack pictured below. Even this, in his own words, “is overkill; you don’t need all of that to be a baker!” Bake’n’Rolls currently has a staking balance of close to three million XTZ and manages the XTZ delegations for around 150 Tezos holders with virtually flawless uptime and reliability. And each cycle — just under three days — the baking rewards are distributed pro-rata to his clients, increasing their individual holdings and increasing the overall amount being baked. Zed also runs a private community for his clients, where upcoming votes on the Tezos chain are discussed, and he’s active in the wider Tezos community promoting new bakers, educating others about the benefits of Tezos, and furthering the interests of the ecosystem.

The Tezos baking rig at Bake’n’Rolls

Compare the above with an equivalent Bitcoin mining setup, shown below:

Bitcoin mining farm

They do exactly the same thing! The difference is startling: in terms of equipment and energy, not to mention accessibility, mining proof-of-work tokens is a whole different — and outdated — world compared to proof-of-stake. The modest rig at Bake’n’Rolls can accomplish what a large Bitcoin mining setup can achieve at a fraction of the cost and space, and with efficiency measured in orders of magnitude. Comparing the two reminds me of early room-sized computers in contrast to the handheld devices commonplace today. Times change.

With proof-of-work, depending on the price of Bitcoin, miners barely break even. It’s a gamble: if the price of Bitcoin rises, profits rise. If the price of Bitcoin falls (as it did during the latter part of 2017 and throughout 2018), miners collapse, unable to justify the massive hardware and running costs, and will do whatever is necessary to maintain their own profitability, even if it’s detrimental to the network (and by implication, detrimental to you). Mining requires seeking out locations where electricity is cheap (i.e. not the United States, nor Europe), yet such locations often suffer from unfavorable political climates, lack of security, internet connectivity issues, and suchlike. Mining proof-of-work coins, in short, is a risk-filled nightmare that few are willing to shoulder. It’s simply outdated technology.

Contrast this to Tezos: proof-of-stake removes the initial investment in equipment, removes the high energy costs, and allows anybody — no matter where in the world — to bake on their average laptop; literally the dictionary definition of a decentralized network. According to Zed, “If you want to be a solo baker, you can run your baker on any device — an old PC or notebook will work just fine.” You — yes, you, reading this on your three-year-old Lenovo — could download BakeChain, buy a roll of XTZ, and start earning baking rewards, all of which helps further decentralize and secure the Tezos network, earning block producer rewards in the process, just like in the early days of Bitcoin. No need to “invest” thousands of dollars in Antminer hardware; the barrier for entry into Tezos is virtually cost-free. This is what Satoshi had in mind, his real vision, not the gargantuan centralized messes that Bitcoin and Ethereum have become in terms of network validation, and which they’re now desperately trying to clean up. And given the low barrier for entry, true decentralization is not just a pipedream for Tezos, but reality.

It’s not just trailblazers like Zed who believe proof-of-stake is the way forward. Major players in crypto — the likes of Polychain Capital (whose Olaf Carlson-Wee himself sits on the board of the Tezos Foundation and runs the largest dedicated Tezos bakery), Tim Draper, and Winklevoss Capital — see the clear advantages of proof-of-stake and have invested heavily in Tezos. The community is thriving, and outsiders are now beginning to understand the benefits of proof-of-stake in general, and Tezos in particular. The Tezos ecosystem is still in its infancy, although well beyond the point where its viability is uncertain, and with support from the Tezos Foundation and entities such as the Tocqueville Group, along with a rapidly-growing developer community, Tezos has a very bright future ahead. The platform is evolving rapidly, attracting major projects such as Viaz, Chorus Mobility, Elevated Returns, and more. As I said in my prior article, it’s still early days, but the smart money is ahead of the game.

Will proof-of-stake replace proof-of-work eventually? The jury is still out on that, although common sense suggests that yes, it’s likely to become the blockchain validation protocol of choice. Does that mean Tezos will one day make Bitcoin irrelevant? Probably not. Bitcoin is unique; it’s what everybody first thinks of when someone mentions cryptocurrency, and has widespread adoption and real-world use that are the envy of every other blockchain: it’s “internet money” in its purest form, and perhaps will always hold that title. Ethereum is trying its hardest to move from proof-of-work to proof-of-stake, and is likely to get there in the end, although playing catch-up is difficult at the best of times. Other proof-of-stake chains are available (or will be), although they themselves lack some of what makes Tezos unique: self-amendment and on-chain governance, for example.

Nobody has a crystal ball, but everybody has a brain. Using the latter to look objectively at the current state of blockchain technology, Tezos is clearly in a prime position to become the proof-of-stake blockchain of choice. It has the right ingredients. It has the right priorities. It has the right community and the right values. It harkens back to those early days of Bitcoin where opportunities lay ahead for everybody who wanted to get involved, yet looks towards a new future built upon new ideas, new technology, and where opportunities await that have yet to be envisioned. But the groundwork has been laid: Tezos exists today and is ready for businesses, bright minds, sideways thinkers, and all those who long for a truly decentralized future, finally realizing the vision of Satoshi and the blockchain pioneers. And best of all, it’s a future that has its doors open wide to all who want to join.