The developers of the crypto currency Ethereum have announced that they want to switch the blockchain from Proof of Work to Proof of Stake in the coming months. The extremely energy-intensive days of the currency are counted, as are those of the currently profitable GPUs in the network.
This is what mining and the Change
The blockchain of a crypto currency is to be equated with the cash book of the currency. Each new block in the chain contains the transfers verified by the network in the blockchain. A validation process is required to ensure that only verified transfers end up in blocks and that the person who created the block is then remunerated in the respective currency (which is actually “mining”). So far, Ethereum has used Proof of Work like Bitcoin.
Proof of Work is safe, but energetically inefficient
With Proof of Work, the user makes his computing power available to a decentralized banking system. All participants, whether alone or in a pool, compute, only the first successful calculation of the block is rewarded with a certain number of the corresponding “coins” (more details in the report Mining with graphics cards: Ethereum mining in a self-experiment).
This consumes huge amounts of electricity, because only one participant in the world can be the first. All other “miners” missed out in this round, the computing effort generated by their PCs and the associated power consumption were “free” at first glance. It is not quite that clear, because a computer might need thousands of years to solve the problem; the massive parallelization is therefore definitely more than just wasteful. And it makes the blockchain secure, because usually a single participant cannot muster enough computing power to be the first to calculate each block and thus pull the cash book to himself.
Ethereum now wants to leave this approach behind and rely on Proof of Stake (PoS). With the PoS variant, the network (automatically) coordinates who among the active participants should create the next block, wasteful “mining of the masses” does not take place. The selection can be made according to different approaches, for example taking into account the assets held in cryptocurrency or the time that a participant has already helped to verify the blockchain in the network.
This has the advantage that only a fraction of the energy is required to maintain the blockchain. In addition, the selected participants have an interest in promoting the network – because they own currency themselves (“stake”). On the other hand, there is a risk of splitting off from the blockchain because the user who acts in this way basically has nothing to lose with his currency.
At PoS, all potentially helping miners are usually remunerated jointly with a low annual interest rate on their cryptocurrency held – so holding more is also rewarded above.
Ethereum wants to use 99.95 percent less energy
In a blog post, the developers tried to estimate how serious the impact on the power consumption of the blockchain could be. Your result: The consumption currently estimated at 44.49 terawatt hours per year (corresponds to the annual electricity consumption in Switzerland or Greece) could fall by 99.95 percent.
However, it cannot be ruled out that a significant part of the active participants in the blockchain does not want to go along with the change and the blockchain splits in a so-called hard fork – into Ethereum based on PoS and Ethereum based on PoW.
More information on energy-efficient blockchains
The editorial team already had more information on energy-efficient blockchains three years ago in the article efficiencies tes mining: cryptocurrencies released for a better cause.