Is Proof of Stake Dead?

Delegated Proof of Stake (DPoS) which many would be familiar of on the Hive Blockchain has always been my preferred form of governance and security. Unlike a typical Proof of Stake (PoS) Network where participants stake tokens for generally long lock periods and the system does as it will with those tokens. Delegate Proof of Stake is a more democratic and equally driven concept where participants elect representatives to secure the network.

On Hive these representatives are called witnesses and participants can regularly engage with them on the blockchain and in Hive's benefit many of the witnesses have media accounts and provide regular updates.

Participants can also vote on proposals that request funding to continue to develop projects and protocols although many of Hive's funded programs are still very limited to UI/UX and data sourcing information.

PoS mainly appeals to people who want to lock tokens and forget about them perhaps as an investment opportunity but is PoS dying?

The impacts of PoS in a market crash or complete wipeout

Typically the lock period for PoS networks is 21 days which is the amount of time you need to wait before you receive your assets once an unstake is initiated. Although the process is drawn out it does have some benefits in relation to providing an APY for participants who help secure the network by staking their assets.

The lock period was developed to also ensure there would always be a large amount of supply available for operational requirements as well as help safe guard against price manipulation and speculation.

Stakers are quite often loyal investors who see future in the project they are involved in and are in it for the long term so happily work in unison to drive their blockchain of choice.

Who's left holding the empty bag?

Regardless on your preferred Blockchain PoS has taken an extremely large hit this crash which has been evident on the Terra (Luna) Network and expanded across the Cosmos and many other blockchains. People who were or are loyal to their blockchain of choice and staked their tokens were left powerless as they watched speculators exit the market en masse, leaving the loyalists and supporters empty handed.

With 41% of total supply staked in Terra Station supporting the security of the network it was the other 59% that ran off with the goods and were able to make moves to secure their financial positions at the cost to the people driving the network.

This was also felt across the Blockchain sector with Osmosis being one of the hardest hit protocols having a large amount of their assets bonded with Luna and UST.

The devastating and widespread destruction of multiple blockchains and projects has left many questioning the safety and security of the PoS system. An event such as this is not possible on the Bitcoin network with Proof of Work which requires the use of hardware and software to approve transactions. When a crash occurs participants are free to liquidate positions and take action instantly.

As seen in a PoS network proposals are quite costly and require a voting period to be undertaken and then an action period, this has been the delay in preventing further destruction of Luna and it's reboot.

Investors have been taught a valuable lesson in this crash and that is to not keep your assets locked in PoS systems that do not enable quick exits and the damaging impacts on the sector and PoS itself won't be seen until the market begins to recover. I have a feeling that many, new and old investors will not be staking their tokens or supporting community validation as it is just too much of a risk to the loyal investors who have been left holding the bag.

Images sourced from Canva Pro subscription. This is not financial advice and readers are advised to undertake their own research or seek professional financial services.

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