Consensus Mechanisms Race to Fix PoW and PoS Flaws Before 2032 Security Crunch

As 2025 unfolds, the bedrock consensus mechanisms powering Bitcoin and Ethereum—proof-of-work (PoW) and proof-of-stake (PoS)—are under fire after hacks and halving-driven budget fears. Rivals like Stellar’s trust-based PoA and Quai’s turbo-charged PoEM claim to fix the cracks.

A Closer Look at PoW and PoS

Ryan Berckmans, crypto ecosystem researcher and long-time Ethereum community member, told Cryptonews that PoW is the original consensus mechanism invented by Satoshi Nakamoto.

Berckmans explained that PoW solves the problem of a public network of computers agreeing on a common shared state. PoW also allows Bitcoin mining.

“PoW is a very important invention because it solved this ‘byzantine generals’ trust problem and started the world down a path to much better economic systems to increase global freedom and prosperity,” Berckmans said.

Berckmans added that PoS offers improved security for Layer-1 (L1) blockchains looking to secure different assets.

“With PoS, a native token with a $1 trillion market cap can secure an app layer with $100 trillion in value at risk. PoW can’t do this,” he stated.

Berckmans pointed out that the strength of PoW lies in its ability to simply reduce risk while driving trust and reliability.

“The mining process is very simple (search for the needle magic number in the haystack) and doesn’t require any funds to be locked up that could be stolen if the miner is compromised,” he said.

On the other hand, he noted that PoS validators have funds at risk that can be stolen or even extorted if the validator private key is compromised.

Challenges with PoW and PoS Blockchains

A number of challenges remain with both PoW and PoS consensus mechanisms. For instance, PoS blockchains rely on economic incentives where validators stake tokens and are rewarded for honest behavior, or punished financially for bad behavior. PoS can therefore be exploited in ways that undermine its security.

In 2023, attackers spent a small amount of their stake to become an Ethereum block producer. They then launched an exploit against the MEV-Boost relay network that resulted in them gaining access to about $25 million worth of stablecoins.

Berckmans further pointed out that a major challenge for PoS is to reduce complexity while maintaining security.

“Ethereum has four production clients for its PoS validator node – this makes Eth the only L1 with practical client diversity, giving a major boost to decentralization,” he said. “But the downside of having four clients is that it adds real-world complexity, including the dreaded potential ‘chain split’ risk.”

A chain split risk can occur if the four clients disagree with each other on the true chain state. This has led Vitalik and the Ethereum Foundation to identify protocol simplification as one of the strategic goals for Ethereum in the coming years.

In regard to PoW, Berckmans pointed out that Bitcoin needs to address its security budget crisis.

“Each halving every 4 years reduces Bitcoin’s security budget by cutting the mining reward in half. Satoshi’s intention was for Bitcoin transaction fees to rise commensurately to offset the reduction in security budget. But this has not happened,” he said.

Berckmans believes that Bitcoin might be highly vulnerable to catastrophic 51% attacks by 2032. He further stated that the only practical way to solve the security budget crisis is to add permanent tail inflation to the BTC supply. However, this would cause the total number of BTC to exceed the 21M “hard cap” limit by the mid-2030s.

Stellar’s “Proof-of-Agreement”

Given the challenges associated with PoW and PoS blockchains, some networks have implemented their own consensus mechanisms.

For example, Stellar uses a “Proof-of-Agreement” (PoA) consensus mechanism. Garand Tyson, senior software engineer at Stellar Development Foundation, told Cryptonews that PoA is a consensus protocol that’s fundamentally different from PoW and PoS.

“PoA is not based on computational power or token ownership, but rather it’s built around social trust and mutual agreement,” he said.

Tyson explained that in order to become a validator, someone who is already a validator on the network must trust that person. “Any person on the network can invite any person they’d like to become a validator, but trust is earned,” he noted.

Trusted validators on Stellar then form a “quorum set,” where each participant is aware of the other. This provides transparency and makes information about validators easily accessible, making it especially valuable for regulatory and auditing purposes.

Tyson added that random entities that could be malicious can’t join the network simply by staking a large sum of tokens, as seen on PoS blockchains. This prevents a range of attacks, like the $25 million MEV boost attack seen on Ethereum.

In terms of security, Tyson explained that final agreement, or “state finality,” depends on a wide range of trusted institutions, including global organizations.

“An attacker would need to convince many of them to accept the same false version of the ledger to complete a malicious act. If even one refuses, the attack fails. PoA offers instant, deterministic finality,” he commented.

PoA also contains built-in fork protection, making it impossible for validators in a quorum set to fork from the network.

“Validators will not continue building blocks until the fork is resolved, unlike most other consensus models that will construct ‘invalid forks’ in the event of a bug,” he said.

Quai Network’s “Proof-of-Entropy-Minima”

L1 blockchain Quai Network also leverages its own consensus mechanism called “Proof-of-Entropy-Minima” (PoEM).

Alan Orwick, co-founder of Quai Network, told Cryptonews that PoEM was inspired by Bitcoin’s PoW. PoEM uses miners’ computational hashes to measure the entropy, or randomness, removed by each proposed block. This ensures that nodes instantly agree on the next block.

“This delivers lightning-fast finality, perpetual consensus, and the ability to coordinate infinite execution shards, achieving over 50,000 transactions per second with fees under $0.01,” Orwick stated. “Unlike traditional PoW, PoEM offers deterministic, objective consensus with enhanced efficiency and scalability.”

Orwick elaborated that Quai Network chose to implement PoEM rather than PoW or PoS for a number of reasons. In order to avoid centralization and large staking requirements that may come with PoS, PoEM’s work-based framework aligns with Quai’s vision of a fair, accessible, and globally scalable monetary system.

“This also empowers miners and users alike while maintaining energy efficiency through merged mining and workshares,” he said.

PWR Chain’s Delegated Proof-of-Power

PWR Chain is a Layer-0 blockchain that uses a consensus mechanism called “delegated Proof-of-Power” (DPOP). This is built upon the Tendermint consensus protocol, yet introduces specific enhancements for quantum security and faster block creation.

Edy Haddad, chief technology officer of PWR Chain, told Cryptonews that DPOP uses Falcon signatures—a post-quantum cryptographic scheme for validator votes on blocks.

He added that DPOP gives all selected validators equal chances to produce blocks. This is important, as the PWR Chain whitepaper explains that in conventional PoS systems, validators receive block creation opportunities in proportion to their stake.

According to the whitepaper, many blockchains have adopted this approach, yet this can lead to centralization. “When block creation chances are tied to stake size, large validators naturally produce most of the blocks. This results in a stable return on investment (ROI) for their delegators, which in turn attracts even more delegators. As a result, these large validators grow larger and more influential over time,” the document notes.

Haddad added that instant finality is a core feature of PWR Chain. This lets developers build without worrying about network rollbacks. DPOP achieves this by requiring 2/3 of the validators to approve each block, granting immediate and irreversible finality upon block creation.

“PoW and PoS enable open, permissionless participation but suffer from slow block times, delayed finality, and high costs (especially in PoW),” Haddad said. DPOP, in contrast, is designed to support PWR Chain’s goals—offering fast block times and instant finality, making it ideal for performance-sensitive applications.

Challenges To Consider

While alternative consensus mechanisms are innovative, these models are far from perfect.

For instance, Tyson noted that one of the most common questions raised with PoA is around trust. “Since the network relies on a group of trusted validators, who gets trusted? The question then becomes ‘could the network become too centralized?’”

Tyson pointed out that Stellar has addressed these issues by making the network open and decentralized by design.

“Anyone can run a validator, but influence is not granted by wealth or computing power; it is earned through mutual trust. Validators are also reputable organizations—banks, fintech companies, legacy institutions, who have reputations to protect. This reduces the risk of bad actors entering undetected,” he commented.

However, another risk with PoA can be the concentration of influence. If too few validators are trusted, a network could drift toward centralization. To counter this challenge, Tyson explained that Stellar encourages diversity in quorum sets.

“Validators are expected to build trust with multiple, independent organizations. That cross-verification limits the ability of one actor or group to dominate influence,” he said.

The lack of direct financial rewards with PoA can be seen as a challenge for participation. Tyson stated that Stellar historically has fewer validators since mining pools and infrastructure companies cannot directly profit from validation alone.

“But this is a double-edged sword; validators are not paid to approve transactions, they participate because they want a say in how the network evolves. This is arguably more attractive to institutions that care about governance, not just profits,” Tyson commented.

Regarding PoEM, Orwick noted that this approach may be too complex for newcomers. “By creating more consumer applications and ways of accessing the network, we can abstract technical details away from users,” he said.

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