What We Lost When Ethereum Switched to Proof-of-Stake

Ethereum’s move to Proof-of-Stake (PoS) has often been described as one of crypto’s biggest technological breakthroughs — and, admittedly, it is. The network finally achieved things that were nearly impossible on Proof-of-Work (PoW): a more robust foundation for truly decentralized applications, including oracles and complex DeFi protocols.

But behind this technical victory, there is another side of the story — the social cost that came with this success. And that’s not something we see discussed very often. No matter how decentralized a network claims to be, humans remain its weakest and strongest link at the same time. At the end of the day, blockchains are built by people, for people — and sometimes at the expense of people, too.

As the DeFi sector continues to evolve, this tradeoff is worth examining in detail. Because if we want better systems, we have to ask ourselves: what does it cost to build them?

Architecture Wins: Why PoS Was Inevitable

To be clear, I have no doubts that PoS unlocked new possibilities that PoW simply couldn’t. For example, the creation of reliable decentralized oracles became possible, which, in turn, are a cornerstone for many real-world use cases in DeFi.

In the PoW era, oracles on Ethereum faced constant hurdles. Blocks could be reorganized too frequently, making it hard to build applications that rely on time-sensitive or guaranteed data feeds. The notion of finality did not exist: it was probabilistic. Transition to the PoS model made this problem manageable, and the network became much more stable and predictable now, which is why we can see so many protocols building on it — as a matter of fact, Ethereum holds the top spot in this regard.

There’s also the energy factor to consider. It’s well-known that mining on PoW is energy-hungry by design — it’s what makes the system secure. But it also made Ethereum’s carbon footprint a frequent target of criticism. While most developers and serious investors are more focused on the technical aspects, environmental concerns were nonetheless a weak point in terms of Ethereum’s public perception. PoS drastically reduced that burden, helping boost the network’s image.

So yes, the move was undeniably a technical win and made perfect strategic sense. As a result, Ethereum got the architecture it needed to stay competitive and relevant. But that’s not the full picture.

Who Lost Out: The Real Social Cost

Setting aside the technical side of the transition for the moment, what about the people who made the PoW era possible in the first place? I’m talking about the miners — thousands of individuals who invested serious capital and effort ended up losing their businesses overnight.

When Ethereum switched to PoS, miners were effectively pushed out, with no compensation and no real plan for how to transition them into the new system. Some could move their hardware to other chains, but the economics weren’t always viable. For smaller operators, it was simply the end of the road.

This is where a certain paradox can be seen. In an industry that puts a lot of stock in community, inclusion, and trustless systems, this particular decision turned out to be very centralized. Core developers and major stakeholders made the choice for everyone, and a huge part of its community got left behind as a result.

And we’ve seen echoes of this before. Hard forks, governance battles, community splits — every time a tough decision arises, the limits of decentralization are exposed. It’s one thing to write it on paper and in code, but when something as massive as Ethereum’s future is on the table — when real money and power are on the line — who really gets a voice?

Scalability and Usability: Still an Open Challenge

Another thing that I believe needs to be addressed is the belief by some that PoS magically solved scalability once and for all. In reality, it’s not so simple. Yes, PoS lays a better foundation, but most of the heavy lifting is still done by Layer 2 solutions and they are not a silver bullet. More of a temporary patchwork solution, really.

Yes, L2 networks allow handling more transactions without clogging the main chain, but they also introduce new points of friction for users: bridging assets between layers, managing security trade-offs, dealing with various UX pitfalls, and more. Anyone who’s tried moving assets between Ethereum mainnet and an L2 knows that the process can often be quite confusing and cost a pretty penny.

The tech may be getting better, but the user experience is still far from seamless. And the more complex the system gets, the harder it is for average users to protect themselves from mistakes, hacks, or human error. Like this, we are still far from DeFi being adopted in the mainstream.

The PoW vs PoS Debate Is Outdated — Let’s Ask Better Questions

Personally, I think the “PoW vs PoS” debate has grown stale at this point. It made sense a couple of years back, but today we should be asking different questions: How resilient are these systems to censorship or coordinated attacks? Who really steps in when something goes wrong — the smart contract, a DAO, a centralized exchange, or a government regulator?

When a bad situation happens, people want a sense of security in knowing that someone will move to fix things. That’s understandable — but if that’s the ultimate fallback, then why do we need blockchains in the first place? If the guarantee comes from a centralized authority, that’s no longer DeFi.

For example, some argue that a 51% attack on Bitcoin is practically impossible because miners are big, publicly traded companies — any malicious actor would face the wrath of regulators, insurance companies, and even law enforcement.

And yes, I can see how that can be reassuring, but it also means the security guarantee is partly off-chain. In PoS, there is a similar logic: large stakers have reputations to lose and capital to protect, but it doesn’t eliminate governance risks or the threat of censorship.

Which is why I believe the industry needs to think deeper: how will new architectures protect people not just from hackers but from internal risks — human greed, harsh governance decisions, or censorship?

A stronger architecture is great, but the industry needs to balance it with stronger social responsibility. Otherwise, we risk building systems that look robust on the surface but are vulnerable at the human layer, where it matters most.

That’s the maturity DeFi needs next if it’s to avoid repeating the mistakes of the legacy TradFi establishment that it seeks to replace.