Bitcoin, Ethereum Consensus Mechanisms Face Scrutiny as Rivals Emerge
3min read As 2025 unfolds, the consensus mechanisms powering Bitcoin and Ethereum—proof-of-work (PoW) and proof-of-stake (PoS)—are facing significant scrutiny following recent hacks and concerns over budget constraints due to halving events. Rivals like Stellar’s trust-based Proof-of-Agreement (PoA) and Quai’s turbo-charged Proof-of-Entropy-Minima (PoEM) are emerging as potential solutions to address these flaws.
Ryan Berckmans, a crypto ecosystem researcher and long-time Ethereum community member, explained that PoW, invented by Satoshi Nakamoto, solves the problem of a public network of computers agreeing on a common shared state. PoW allows Bitcoin mining and is considered a crucial invention for its ability to solve the ‘byzantine generals’ trust problem, paving the way for better economic systems and global prosperity. PoS, on the other hand, offers improved security for Layer-1 (L1) blockchains by securing different assets with a native token.
Berckmans highlighted that PoW’s strength lies in its simplicity and reliability, as it does not require funds to be locked up, reducing the risk of theft or extortion. However, PoS validators have funds at risk, which can be compromised if the validator’s private key is breached. This vulnerability was demonstrated in 2023 when attackers exploited the MEV-Boost relay network on Ethereum, gaining access to about $25 million worth of stablecoins.
One of the major challenges for PoS is reducing complexity while maintaining security. Ethereum, for instance, has four production clients for its PoS validator node, which boosts decentralization but adds real-world complexity, including the risk of a chain split. Vitalik and the Ethereum Foundation have identified protocol simplification as a strategic goal to mitigate this risk. Meanwhile, Bitcoin faces a security budget crisis due to halving events, which reduce the mining reward by half every four years. Berckmans believes that Bitcoin could be vulnerable to catastrophic 51% attacks by 2032, suggesting that adding permanent tail inflation to the BTC supply might be the only practical solution, albeit at the cost of exceeding the 21M “hard cap” limit by the mid-2030s.
Stellar’s PoA consensus mechanism is fundamentally different from PoW and PoS, as it is built around social trust and mutual agreement. Garand Tyson, a senior software engineer at Stellar Development Foundation, explained that PoA relies on trusted validators who form a “quorum set,” providing transparency and making information about validators easily accessible. This mechanism prevents malicious entities from joining the network simply by staking a large sum of tokens, as seen on PoS blockchains. PoA offers instant, deterministic finality and built-in fork protection, making it impossible for validators in a quorum set to fork from the network.
Quai Network’s PoEM consensus mechanism is inspired by Bitcoin’s PoW but uses miners’ computational hashes to measure the entropy removed by each proposed block. This ensures that nodes instantly agree on the next block, delivering lightning-fast finality, perpetual consensus, and the ability to coordinate infinite execution shards. Quai Network chose PoEM to avoid centralization and large staking requirements that may come with PoS, aligning with their vision of a fair, accessible, and globally scalable monetary system. PoEM’s work-based framework empowers miners and users alike while maintaining energy efficiency through merged mining and workshares.
PWR Chain, a Layer-0 blockchain, uses a consensus mechanism called “delegated Proof-of-Power” (DPOP), built upon the Tendermint consensus protocol with enhancements for quantum security and faster block creation. Edy Haddad, chief technology officer of PWR Chain, explained that DPOP uses Falcon signatures—a post-quantum cryptographic scheme for validator votes on blocks. DPOP gives all selected validators equal chances to produce blocks, avoiding centralization issues seen in conventional PoS systems. Instant finality is a core feature of PWR Chain, achieved by requiring 2/3 of the validators to approve each block, granting immediate and irreversible finality upon block creation. DPOP is designed to support PWR Chain’s goals of fast block times and instant finality, making it ideal for performance-sensitive applications.
While alternative consensus mechanisms offer innovative solutions, they are not without challenges. Tyson noted that PoA’s reliance on trusted validators raises questions about centralization and the concentration of influence. Stellar addresses these issues by making the network open and decentralized by design, encouraging diversity in quorum sets to limit the ability of one actor or group to dominate influence. However, the lack of direct financial rewards with PoA can be seen as a challenge for participation, as validators are not paid to approve transactions but participate because they want a say in how the network evolves.
Regarding PoEM, Orwick noted that this approach may be too complex for newcomers. By creating more consumer applications and ways of accessing the network, Quai Network aims to abstract technical details away from users, making the technology more accessible. Despite these challenges, alternative consensus mechanisms like PoA, PoEM, and DPOP offer promising solutions to address the flaws in PoW and PoS, paving the way for a more secure and efficient blockchain ecosystem.
