Ethereum is planning to migrate to PoS (Proof of Stake) in the coming future. It is claimed that migration to the PoS system will cause an energy saving of up to 99 per cent.
There are critical comments on the substantial energy consumption of the ETH cryptocurrency. These criticisms make Ethereum non-environment-friendly crypto money.
Proof-of-Stake vs proof-of-work (Source: Simply Explained – Savjee)
Some reports claim that crypto mining consumes more energy than gold mining, but some others are on the contrary side. A few others think that mining, in general, is not an environment-friendly activity.
Ethereum was founded to be a global computing system. It became an organised developer community after being a pioneer in Blockchain “Smart Contracts“. In 2018, Ether’s average price was around $1,400, but it dropped to below $200 levels recently.
Etherum is using the PoW (Proof of Work) system as a common-base to fix Ethereum Blockchain. Additionally, Vitalik Buterin who is the founder of Ethereum pointed out the critical fact of the consumed energy to secure Ethereum Blockchain.
Although nobody focuses on the ecological problems caused by the PoW based Blockchains, there are a reasonable number of people who are in short of electricity worldwide.
This conflict mostly relates to the competition of the PoW-based Blockchain miners for offering more secure cryptographic transactions. It also enables the cryptocurrency miners to differentiate themselves regarding account capacity.
According to Vitalik Buterin, PoW (Proof of Work) based high-capacity electric-consuming hardware concept is exclusively designed to produce cryptocurrency type of rewards. There is a direct correlation between mining power and mined rewards.
PoW (Proof of Work) mechanism works on the logic of producing huge rewards by the result of consuming high power.
PoS (Proof of Stake) working mechanism depends on the protection of the network which is ultimately the opposite of PoW (Proof of Work).
PoS differentiate itself by relying on punishments rather than rewards to maintain the security.
A Brief Information on PoS (Proof of Stake)
In PoW (Proof of Work), cryptocurrency miners compete on verifying the same tasks. But PoS (Proof of Stake) mechanism selects the verifiers randomly to process and secure the transactions.
At a PoS (Proof of Stake) system, the miners and verifiers are identical. Secondly, the primary concern of a PoS mechanism is to maintain the fairness of the verifiers all the time. This verification requires payment of a share in Ether cryptocurrency as a warrant.
Therefore, we can define PoW (Proof of Work) as “maintaining security by outputting the lost economical value” rather than “maintaining security by consumed electrical energy“.
The probability of being selected increases proportionally as the share of the verifier increases. More importantly, scammers will lose their shares. This asymmetrical difference between the potential rewards and the scam risks enables the verifiers to stay honest.
One of the most significant things about the PoS system is that verifiers do not consume more energy (when compared to PoW) to maintain the secureness of the network. Naturally, the rewards would be less also. According to Casper Github wiki:
Due to lack of high electricity consumption, there is no need to create new crypto-coins in order to motivate the contribution of the verifiers to the network.
Stiff Competition Will Take Place in PoS Area
As Ethereum has got the advantage of the first-move privilege, it has progressed a lot for the production of the first global computer. There are many protocols like MakerDAO which was built on the ETH network.
Additionally, there is a progressing DeFi (Decentralised Financing) project which consists of “Compound”, “dYdX”, and “CDx” components.
Last but not least, there are teams which compete on developing PoS complaint chains. As a result, there is not a guarantee for Etherum to keep its first ranking on overcoming the excess energy consumption and scaling.