Bitcoin Critic Peter Schiff Explains Why Proof of Work Makes No Sense

It’s not every day that the CEO of a major cryptocurrency exchange and a vocal Bitcoin critic find themselves in a back-and-forth, but here we are. Brian Armstrong, the head of Coinbase, recently pointed out a problem that’s both a blessing and a curse for the crypto industry: the sheer volume of new tokens being created.

With around 1 million tokens popping up every week, Armstrong argued that the current system of evaluating each one individually is no longer feasible.

Instead, he suggested a shift from an “allow list” to a “block list,” relying on customer reviews and automated scans of on-chain data to help users sift through the noise. He also hinted at deeper integration with decentralized exchanges (DEXs), aiming to make the trading experience seamless, regardless of whether it happens on a centralized or decentralized platform.

Proof of work? Nothing more than hole in ground

Enter Peter Schiff, the gold advocate and cryptocurrency skeptic who never misses an opportunity to question the value of digital assets. Schiff’s response to Armstrong’s comments was characteristically blunt.

He zeroed in on the idea of “limited supply,” a cornerstone of Bitcoin’s value proposition, and called it into question. With so many tokens flooding the market, Schiff argued that the inflation rate of digital assets is effectively “off the charts.”

He, however, did not stop there and took aim at Bitcoin’s proof-of-work mechanism, the process by which new coins are created and transactions are verified. To him, proof of work is a flawed concept.

It’s not backed by energy. Energy is used to create Bitcoin, but that energy is gone after Bitcoin is created. If you own Bitcoin you do not own any stored energy that can be released. Bitcoin is not a battery.

— Peter Schiff (@PeterSchiff) January 26, 2025

Schiff compared it to spending $10,000 to dig a hole and then fill it back up — energy is expended, but nothing of value is created. While Bitcoin enthusiasts often tout the energy-intensive process as a feature, the gold advocate sees it as a bug.

Energy is consumed, yes, but it is not stored or transformed into anything useful. Bitcoin, he argued, is not a battery; it does not hold energy that can be tapped later.

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